Weak physical demand for gold, especially from the two largest consuming countries India and China, coupled with record equity prices brought a quick end to the brief bull run that saw gold soar to over US$ 1,300 per ounce in September, Thomson Reuters has said while releasing its GFMS Gold Survey: Q3 2017 Review & Outlook.

However, analysts at the agency believe that there is now a base for a more sustainable move above $ 1,300 later this year, with a further rise predicted for 2018 at an average of $ 1,360 and a 2018 peak of almost $ 1,450.

Physical demand during the quarter ended September 30, at 900 tonnes was 7.3% higher than the 844 tonnes in the same period a year earlier. This was also the lowest level for a year, and excluding the exceptional situation in 2016, was the lowest quarterly total since Q4 2009.

Jewellery demand remained weak, and though at 475.2 tonnes in July-September 2016 it was 11% up year-on-year (Q3 2016: 427.2 tonnes), it was still significantly below the level seen two years earlier.

In India, jewellery consumption was higher by 17% year-on-year at 141 tonnes; it was still the lowest since Q4 2016 and 5% lower than the average quarterly demand this decade.

In China, demand remained weak overall and despite some revival of the jewellery sector in the third quarter, over the first nine months of 2017, jewellery fabrication demand at 458.9 tonnes was still marginally below the 466.1 tonnes in the corresponding period last year. However, this modest fall must be seen in the context of several years of double-digit percentage declines.

US jewellery consumption increased by 8% from last year to total 34.9 tonnes in Q3. Domestic production nudged slightly lower whilst net imports of jewellery increased at a healthy pace, GFMS said. Demand will continue to flourish in the final quarter of this year, GFMS feels.

It is noticeable that the improvement in physical demand has not been enough to offset the slowdown in ETF purchases from the stellar surge last year. The latter has been hindered by weakness in the key U.S. market and net redemptions in China.

Retail investment has been similarly unspectacular although at least coin demand has been better than the difficult summer months with Chinese and US coin demand being the key drag again.

With key global equity markets all recording all-time highs in recent weeks it is likely that some investors may implement (or increase) an asset allocation into gold. This, supported by continued geopolitical tensions, whether from events in Korea, Catalunya or even the upcoming Italian election or Brexit negotiations, could see prices move upwards again in the not too distant future.