Gold market could have worst behind it; emerging markets buying: BoA/Merrill Lynch

London (July 21)   The "worst may be behind" the gold market, as the price going forward will be increasingly supported by emerging market buying, BoA/Merrill Lynch said Monday in a research note.

 "After the sharp correction in 2013, gold prices have stabilised this year. Looking at supply and demand dynamics, this was heavily influenced by reduced investor selling at the same time as physical offtake from emerging markets has been steady," BoA/ML analyst Michael Widmer said in the research paper.

 "We believe that physical demand from emerging markets will gain further clout in the medium term as countries get more affluent, suggesting the worst may be behind the gold market," said Widmer.

 Gold had been on the back foot towards the $1,200/oz area earlier in 2014, but has since recovered to trade in a range centered around $1,300/oz.

 "However, for now, investors -- especially in advanced nations -- remain the marginal buyers and gold tends to be bought and sold around macro-economic 'themes'. In our view, the unfolding normalisation of the global macro economy and the implications this has for rates/inflation should continue to provide some headwinds for gold," said the analyst.

 Gold fixed on Monday morning at $1,312.75/oz from $1,321.25/oz a week ago.