In the first update to its 2014 gold survey, Reuters said the yellow metal would average $US1270 ($AUD1421) an ounce in 2013, 10% lower than the US$1411.23/oz average in 2013.

Prices are anticipated to recuperate farther down the line, nonetheless, with last year’s unpredictability already beginning to level out.

“There was a large fall in physical gold demand in the initial half of 2014 compared with the massive demand in the first half of 2013.

“A vital point this year is the fact that gold is basically in a period of recuperation after last year’s dizzying activity,” Reuters said.

“Last year was highly anomalous, nevertheless, driven by the dramatic cost fall in the 2nd quarter the marketplace has of late been gradually recovering its composure.”

Reuters said Southeast Asia in particular had fought to digest its significant gold consumption from 2013.

In the broader market, it said professional and grassroots buyers sentiment had both been poor.

“The lack of a clear cost direction and the expectation of lower prices happen to be key drivers in deterring purchases among private buyers as well as a similar attitude has prevailed in the professional sector,” Reuters metals research and forecasts head Rhona O’Connell said.

The only country this year, to post a notable gain in physical demand was the US, where weaker costs and improving consumer sentiment drove an 8% rise in jewellery fabrication.

Elsewhere, Reuters said a European recovery could be key to altering professional opinion in the gold marketplace.

“There continues to be a whiff of professional investor interest this year yet this really is still quite tentative as perceived economic and financial risks are skewed, in the USA at least, toward continued tapering followed by a swing to rising interest rates,” analysts said.

“At present these features would be the prevailing drivers of opinion and, with the perceived dearth of price response to the tensions in the Middle East, has not only discouraged investment but resulted in an expansion of short positions in the market.”

In the supply side, Reuters said mine output was increasing this year after preceding investment.

However, margins remain under pressure and total cash prices that are world-wide have dropped 6% over the first half.

The typical grade of ore that was processed has also risen for the first time in a decade.

“This will probably attract the attention of professional investors, especially when coupled together with the likelihood of increased inflationary anticipation developing in the latter part of 2015 and beyond.

“With a growing demand profile and a flat to declining supply outlook, the market equilibrium is expected to continue to tighten during the the next couple of years,” Reuters said.