OREANDA-NEWS. February 17, 2015. The price of gold appears caught in a holding pattern, stuck between what is actually happening to demand and what potentially may happen.

The World Gold Council's latest quarterly report provides a snapshot of the different dynamics at work in the gold market, and goes some way to explain why the precious metal has been marooned in a fairly narrow range for almost two years.

The broad picture from the council's Gold Demand Trends 2014 report is that last year was the weakest since 2009.

This fits in with spot gold's modest 1.8 percent decline over the year, but the breakdown of that demand shows where the pressure points are located.

India regained its status as the world's top gold market, with demand totalling 842.7 tonnes, but this was still 14 percent below 2013 levels.

China slipped back to number two with 813.6 tonnes, a substantial 38 percent decline as consumers pulled back from buying gold after a record year in 2013.

What happens in the two Asian powerhouses is important, as together they represent half of the global gold consumer demand.

It's possible to construct a bullish case for India, as government restrictions on gold imports are eased and economic growth lifts, but the question remains as to how much extra demand the South Asian nation is capable of generating.

A return to levels around 1,000 tonnes per annum isn't an unreasonable expectation and this would no doubt provide support for the physical gold market.

There is more of a question mark over China, with uncertainty over the strength of consumer demand following the buying spree in 2013 when gold prices fell sharply.

This may have created a buyers' hangover, which together with China's crackdown on graft and support for official austerity may limit the upside for the country's gold demand.

What happens during the Chinese New Year holidays this week will provide some indication of the strength of consumer demand.

The World Gold Council also breaks down global gold demand into categories, with the largest being jewellery, which accounts for slightly more than half of total demand.

This fell 9.7 percent in 2014 from the prior year, but excluding China, jewellery demand held up well, with more interest being seen in developed nations.

Again, China was behind a sharp fall in coin and bar investment, but exchange-traded funds, the main way investors in developed nations play the gold market, also saw net outflows, although not as much as they did during the 2013 gold crash.

Technology demand, which accounts for 10 percent of the global gold demand, is in a modest long-term downtrend as it battles against cheaper alternatives.

Central bank net purchases rose in 2014 and, while not quite near 2012 levels that nonetheless remains a source of solid demand for gold.

Overall, the picture that emerges is one of reasonably solid jewellery and central bank demand, and weak investment demand.

Looking ahead as to how these trends may play out in 2015, and it's possible that jewellery demand may improve as the global economy, outside of Europe, makes some progress.

India will likely be stronger, but steady demand from China would likely be a positive outcome.

Investment demand is perhaps in a bit more of a quandary, as the end of quantitative easing in the United States coupled with the ramping up of it in Europe creates opposing dynamics.

Rising interest rates in the United States would argue for softer gold prices, as would the fear of deflation in Europe, but if European investors do fear depreciation of the euro, either from monetary easing or a messy Greek exit, then gold could benefit from safe-haven demand.

But any boost to safe-haven demand may well act as a brake on jewellery demand, as consumers spend less on what is still viewed as a luxury purchase.

While net central bank purchases have been a bright spot, again, there has to be a question mark over whether this can sustain at current rates.

This is especially the case with Russia, which last year accounted for about 35 percent of net central bank purchases, but the plunge in the rouble in 2014 may curtail the central bank's ability to buy dollar-denominated assets.

That is why gold is currently caught between what is actually happening and what may happen.

The current steady physical demand points to prices staying within the recent range of around \\$1,140 to \\$1,400 an ounce.

For any bullish case to be realised, physical and investor demand will have to pick up from current levels, and while this may happen, it's not happening yet.