Author: Paul Ploumis09 Jan 2015 Last updated at 00:50:11 GMT

(Kitco News) - Volatility will be high in what should be an interesting year for gold prices as the market reacts to a variety of forces, according to Macquarie Research analysts.

However, Matthew Turner, commodity analyst for the Australian Bank, said that despite the opposing forces, they see some upside momentum for gold in the medium term and the yellow metal should perform better compared to 2014.

The brightest spot for the gold market continues to be strong demand out of Asia. Turner noted that 2015 will mark the first time that Chinese and Indian demand will be “firing on all cylinders” since 2013.

In China, higher stockpiles from 2014 have been mostly played out so imports should rise this year, he added. Chinese gold imports are expected to be strong into next month as consumers prepare to celebrate the Lunar New Year Feb. 18.

Turner also said there was some uncertainty as to whether or not the Indian government would introduce new curbs to gold imports. However, on Wednesday, Indian Trade Secretary Rajee Kher clarified the government’s stance saying, in a meeting with industry representatives, there were no plans to impose any new restrictions.

Although physical demand will remain strong through 2015, the market still has to compete with investor demand, which Turner said will suffer as the Federal Reserve hikes interest rates by mid-year.

“We still have to get over that hurdle,” he said. “It will be a momentous moment for the market because they haven’t had a rate hike since 2006.”

But it is what comes after that initial hike that will have a big impact on gold. Turner said that they are expecting the pace of future increases will be much slower than what the analysts are currently expecting, and that should be good for gold.

He added that they expect the first rate hike to signal a top in the U.S. dollar.

“In the near-term, the path of least of resistance for the U.S. dollar is higher. But, because we think U.S. interest rates will peak at a lower level, we should see it fall back a little,” he said.

The biggest unknown for gold in 2015 will be the safe-haven demand. A mini-crisis in Europe has helped keep gold prices above the key psychological area of $1,200 since the start of the new year, and Turner said that it is too soon to tell just what impact this will have on gold in the long-term.

Turner said that the size of Europe’s latest crisis and the demand for gold as a safe-haven asset will depend on initiatives introduced by the European Central Bank.

“Gold does well when governments and central banks are seen as losing control,” he said. “If the ECB can show that they are in control then I think demand for gold as a safe-haven will be low.”

Courtesy: Kitco News