Will gold tarnish or shine in 2015?

Selection of gold coins at London auction house.
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Resurgence in gold demand from China and India, the world's biggest consumers, is set to restore some shine to the yellow metal in 2015 after a lackluster year.

"Physical gold demand in China and India were held back in 2014 amid high stocks and import controls, respectively," said Victor Thianpiriya, commodity strategist at ANZ. "Both these shackles have been removed, putting demand on a solid footing as we head into 2015."

In China, physical gold demand will return because stocks are depleting, said Thianpiriya, who sees the precious metal ending 2015 at $1,280 an ounce, up from $1,200 currently.

Will gold shine bright in 2015?

"Strong demand through the back half of 2013 and into 2014 resulted in a significant onshore stock build in China. This further resulted in subdued levels of imports through the second half of 2014, which has helped to run down the onshore build-up of stocks," he explained.

India, meanwhile, removed restrictions on gold imports late-November in a move that is expected to reduce smuggling and raise legal shipments.

Traders are no longer required to export 20 percent of all gold imported into the country – a measure that was introduced last year to lower inbound shipments and reduce the country's current account deficit.

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"This has significantly changed the landscape for the market in India, opening up all import channels once more," said Thianpiriya.

There is, however, a possibility of other restrictions being placed on the market over time, he said, such as import quotas.

What about the stronger dollar?

While a rising U.S. dollar has tarnished gold's appeal this year, Thianpiriya believes physical demand will help offset headwinds from a stronger greenback next year.

A stronger dollar can be negative for gold demand as it makes the metal more expensive for holders of foreign currencies.

David Lennox, resource analyst at Fat Prophets says while dollar strength may be headwind for gold in the first-half, the currency is likely to ease in the second-half following the Federal Reserve's first rate hike. This should provide some support for gold later in the year, he said.

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The second-half is also likely to see a surge in festive demand out of India, he said, another support for prices. The festivals of Dhanteras and Diwali, considered auspicious occasions for buying gold, fall in November.

Lennox expects these factors, alongside a slowdown in gold supply, could push prices up to around $1,350 by year end.

The drop in gold prices has forced higher-cost producers to cut back on production, said Lennox.

Geopolitical factors

Greg Smith, Group CEO at Global Commodities says if there's one fact that will drive gold prices higher next year, it will be geopolitical risk.

"I see possible support for gold if we see more tensions in the Middle East or Russia, otherwise it will be rangebound," he said.