(Kitco News) –HSBC looks for a recovery in gold prices next year, maintaining forecasts for the metal to average $1,205 an ounce in 2016 and $1,300 in 2017.

The bank listed three main supportive factors, including solid demand in emerging-market nations, its expectation for a stronger euro versus the U.S. dollar, and renewed buying of gold exchange-traded funds.

“We remain mildly bullish on gold prices, but the bounce has taken longer than we had anticipated,” said a report from analysts James Steel and Howard Wen. “Gold prices recently again fell to five-year lows, largely on the back of renewed USD strength.”

The bank listed a broad range of $1,025 to $1,275 an ounce for 2016.

The analysts suggested emerging-market demand “has already set a floor for gold prices,” and they look for buying from India and China to increase in 2016. They described emerging-market buyers as highly price sensitive.

“Gold prices have dropped to levels that are now likely to stimulate emerging-market physical demand,” HSBC said. “Historically, EM demand has increased below $1,100/oz. This demand may increase further should prices drop to $1,000/oz.”

The bank does not expect the Indian government’s recently announced gold monetization to impede demand in the country. Analysts also said they expect Chinese incomes to keep rising enough to support more gold purchases.

Meanwhile, despite the potential for a rate hike by the U.S. Federal Reserve, HSBC foreign-exchange strategists said the euro is likely to rally against the U.S. dollar. Among other factors, they cited potential for an abbreviated tightening cycle or even a reversal of such policies. A stronger euro presumably would boost bullion due to the inverse relationship between the precious metal and the dollar.

HSBC also projected that exchange-traded funds (ETF) will become net buyers again in 2016, after net selling this year. ETFs trade like a stock but track the price of the commodity, with metal put into storage to back the shares.

“Gold ETFs have liquidated considerable amounts of bullion since 2013,” HSBC said. “The pace of liquidation in the ETFs this year is more moderate than in 2014 but is still sufficient to weigh on prices.

We believe the bulk of ETF sales have occurred. Many ETF holders have adopted buy-and-hold

strategies that should keep the bulk of remaining holdings largely intact.”

HSBC also looks for central-bank demand to remain strong in 2016, projecting purchases of 450 tonnes after an expected 500 this year. “While we expect 2016 purchases to be down on 2015 levels, they

would still be historically high and hence price supportive,” HSBC said.

Analysts said mine supply is likely “topping out,” although they do not look for a significant decline next year. “Low prices will help keep supply tight in part by discouraging scrap supplies from the recycling markets, and hedging should have little impact on the market,” HSBC said.