Gold prices continued their decline in 2015 as investors continued to focus on equities, real estate and other investments instead of gold and commodities, states New York-based research and consulting firm CPM Group.

CPM had stated, beginning in late 2010, that gold and commodities prices might reach “a cyclical peak in a secular bull market”, possibly around 2011, and then decline for three to five years before resuming their upward moves.

The firm points out that gold and commodities prices have been declining for more than four years, since late 2011. CPM’s current analysis, outlined in detail in its 227-page annual Gold Yearbook 2016, suggests that the earlier expectation that prices would bottom out after three to five years before resuming their upward trajectory remains the most valid approach to future gold price trends.

The firm says that the fundamentals of gold and commodities, and the economic, political and financial market environments that have been favourable for other investments in recent years are turning more supportive of gold investments.

“The US and world economy may not slide into a recession or run into major problems in 2016, but there are numerous problems emerging and on the not-too-distant horizon,” CPM warns.

It says that, at any point, one or more of these issues could become critical enough to global and national growth prospects that, they would rekindle stronger investor demand for gold.

The firm comments that, when that happens, the gold market’s supply and demand trends are tight enough that prices would be expected to rise.

The Gold Yearbook 2016 addresses the evolution of these fundamentals over the past few years and the impact these fundamentals are expected to have on the price of gold over the course of 2016.

One gold market fundamental that has been gaining importance as a positive influence on gold prices in recent years is central bank gold demand.

CPM states that 2015 marked a particularly important period with regard to demand from this sector. The People’s Bank of China (PBOC) made a series of very important moves and statements in July 2015, with some of the announcements focused on gold, and the PBOC signalling that it had changed its attitude toward gold as a monetary reserve asset.

PBOC announced that it had added 19.4-million ounces of gold to its holdings in June 2015 and also that it would continue to buy gold and add it to its monetary reserves as it buys it, which it has been doing since July 2015.

The firm notes that, while investors have been net buyers of large volumes of gold over the past few years, which has helped keep gold at historically elevated levels, they have reduced their purchases from 2011/12 levels.

“Going forward, investment demand is forecast to grow, setting up investors to compete with central banks for gold, which should influence prices positively,” CPM contends.

The firm highlights that mine supply grew in 2015 and is forecast to continue rising in 2016.

CPM explains that the increase in mine supply was offset by a decline in scrap supply, which pushed total supply lower during the year. Total supply is forecast to rise in 2016 as the increase in mine supply overshadows the decline in secondary supply.

Additionally, the firm remarks that fabrica- tion demand has been the largest beneficiary of the relatively weaker gold prices over the past few years. Gold fabrication demand rose to 96.7-million ounces in 2015, the highest level of gold use in jewellery, electronics and other fabricated products since 2007.

“Fabrication demand is forecast to continue rising during 2016, albeit at a slower pace than in 2015,” CPM concludes.