This week, HSBC Global Research raised its gold price forecast for the rest of 2013 and sites the demand for physical gold as the main driver. Earlier in the year, HSBC forecasted gold ending the year at a price of $1,396 an ounce. They have now increased their prediction to $1,446 per ounce.

On Thursday, HSBC said, “Physical demand for jewelry, coins, and bars from China, especially, are supportive and becoming a key driver.” September also marks the start of wedding and festival season in India which has historically increased demand for physical gold.

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Despite the increased demand overseas, HSBC thinks that the demand for gold from U.S. investors will remain volatile as they wait to see what the Federal Reserve will do and how the Middle East crisis will play out.

The Federal Reserve continues to hint at an end to the billion-dollar bond-buying program which should strengthen the U.S. dollar. “Expectations that the US Federal Reserve will reduce stimulus measures will continue to weigh on the gold market. The prospect of a stronger US dollar as a result of Fed tightening is likely to present headwinds to further gold rallies,” HSBC said.

That being said, there remains a lot of speculation that the current stock market rally could end and that it may possibly experience sharp declines. Also, the lack of inflation experienced during the Fed’s stimulus has lead many experts to predict a period of high inflation in the not-so-distant future.

There are a lot of reasons to be bullish on physical gold despite the uncertainty about the Fed’s plans. Strong demand in Asia, the rising Middle East conflict, the potential for inflation, and a stock market due for a correction are all reasons to buy physical gold as a hedge in any investment portfolio.