Demand for physical gold out of China and other emerging markets has become the key driver of bullion prices, according to HSBC, as the rampant outflows from exchange traded funds (ETF) seen last year begin to stabilize.
"Investment demand, which had fueled the rally for over a decade, is no longer driving gold prices," James Steel analyst at HSBC wrote in a report on Tuesday.
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"Instead, we believe gold is being driven by physical demand for jewelry, coins, and bars from China, in particular. Indeed, we would argue that physical demand trends in the emerging world will largely define gold's price movements this year," Steel added.
Gold's 12-year bull-run ended in 2013, with prices suffering their largest annual decline since 1981 as the Federal Reserve's decision to taper its monthly asset purchases triggered heavy ETF selling.