Early signs of renewed professional interest in the market and an improvement in grassroots retail activity may signal that gold has reached its bottom and that prices are set to rise, the GFMS team at Refinitiv said on Friday, but warned that the yellow metal was not out of the woods yet.

Refinitiv is forecasting an average gold price of $1 224/oz for the fourth quarter, leading to a yearly average for next year of $1 285/oz. The metal has garnered some support from trade tensions, but the organisation stated that neither these concerns, nor the continued bartering in the European Union had intensified or dissipated.

“…this steady background rumbling, aided by associated central bank activity has given gold some support above $1 180/oz and this is leading short-side traders to lock in profits. There is little appetite as yet for fresh longs, however,” it said in a statement.

Gold traded at $1 215/oz on Friday, up from its year-to-date low of $1 174/oz in mid-August.

Fitch Solutions earlier this week published its outlook for gold and is forecasting a price of $1 250/oz for 2018, increasing to $1 300/oz in 2019, stating that it was “fairly neutral” towards gold in the next six months.

“Plunging global equity markets have bolstered the characterisation of the current global economic cycle as ‘late cycle’ and raised the chance of repeated volatility in the coming months. In this context, we expect sentiment towards gold prices to rebound from currently depressed levels as investors raise allocation to counter-cyclical assets, helping to stem the slide in prices that has taken place in 2018,” Fitch stated.

Refinitiv said that weaker prices supported gold demand in the third quarter, which edged 4% higher to an estimated 1 010 t, but that gains were offset by large exchange-traded funds (ETF) outflows.

It stated that the “world-weary attitude” in the professional investment sector was illustrated by fresh ETF liquidation in the third quarter and heavy short-side trading on the Comex. ETF holdings dropped from 2 312 t at the end of June, to 2 221 t at the end of September, representing a net dollar outflow of $3.5-billion. At the end of the quarter, the value of the contained gold was $85-billion.

However, there were signs of renewed interest, with long positions being re-established on  Comex and short covering developing in October.

In the third quarter, fundamental retail investment (coin and bar demand) was mixed. Retail investment overall was up everywhere year-on-year on a regional basis, with the exception of South America (and, within North America, Mexico).  On a longer-term basis, the GFMS team at Refinitiv said that the prospects for investment were brighter as disillusionment was setting in with respect to the property and equities markets.

Global jewellery demand rose by 3% on a year-on-year basis in the third quarter, although fabrication fell by 1%.

The official sector has continued to diversify its foreign exchange holdings in the face of concerns over the strength of the US dollar, US trade policy and the currency contagion between some emerging market nations.

The report estimates year-to-date net purchases at 322 t, 18% over the equivalent period of last year. Third quarter purchases are currently pegged at 127 t, the largest quarterly figure since the third quarter of 2015. The report forecasts net 2018 official sector purchases to reach 450 t.

The mining sector has continued to see stronger output, with further modest gains in the quarter and looks set for another yearly rise in 2018.