The dollar price of gold bullion will hold onto its gains next week, according to respondents to S&P Global Platts Gold Sentiment Survey, on expectations the macro economic environment will continue to support prices.
Gold recovered up to 1.5% this week to $1,340/oz Thursday as the Federal Reserve downplayed the chance of an additional rate hike this year, before easing to around $1,330/oz Friday morning.
The Platts survey of 20 industry participants showed most were expecting gold prices to move sideways or firm further next week, with macro developments playing a key role.
"The current interest rate environment is very favourable to gold, with both the Fed and [Bank of Japan] meetings this week likely to support prices into the next several days," one analyst told Platts.
"With inflation well below its 2% target, the Fed's hands are tied," he added.
Gold was given a boost this week as the Fed kept interest rates unchanged at its July meeting Wednesday, as was widely expected, but officials gave no signal of a near term rate rise despite improving economic conditions.
According to CME Fed Fund Futures Friday the probability of a rate hike by December is below 43%, down from 52% at the beginning of the week. May is now the nearest month with a probability over 50%.
The Bank of Japan kept interest rates unchanged Friday, and decided to maintain its current pace of asset purchases, but did not embark on the further quantitative easing some analysts had expected.
As central banks around the world look to expansionary monetary policy to stimulate sluggish growth, gold has been the clear winner - up over 25% year-to-date, largely because it is a store of wealth.
At the same time, respondents to the Platts survey warned headwinds to gold could include a strengthening dollar, which had moved to four-month highs last week before the Fed announcement, as well as further profit-taking by speculators.
Investor sentiment has started to wane in recent weeks, bullish gold positions down close to 8% on COMEX in the two most recent weeks for which data is available, while gold-backed ETFs have added to recent outflows.
Physical demand also remains very weak, with Platts reporting discounts of $30-$40/oz to the international price for gold in India this week, the local market struggling with exceptionally low demand.
China premiums have been reported at $2-$2.50/oz this week, with Dubai at a discount of -$2/oz and Turkey flat.
GFMS Thomson Reuters this week reported a 22% year-on-year fall in gold demand in the second quarter to 715 mt, "exceptionally weak" Asian demand resulting in the lowest quarterly total in seven years.
Total physical demand for the first half of 2016 was 1,479 mt, down 23% from 1,919 mt in 2015.
But strong investor demand, including a record high 568 mt of ETF build in the first half of the year, resulted in a surplus of just 113 mt for 2016, down from 179 mt in 2015.