HSBC Holdings PLC, Europe's biggest bank, said on Wednesday that it's bullish about the gold market despite price fluctuations earlier this month.

The bank predicts concerns over geopolitical risks, loose monetary policy and a fiscal deficit in the United States, are likely to rekindle a rally in gold price.

HSBC expects the gold price to average a high of $1,525 an ounce this year, up from an earlier forecast of $1,450. The forecast for 2012 has been raised to $1,500 an ounce from $1,300.

"We are bullish on the gold market going forward. We believe that gold will remain at elevated levels for several years," said James Steel, HSBC's precious metals analyst.

Steel said the pullback in early May, which cut $110 off the record high price, was triggered by a correction in commodity prices, notably oil, a bounce in the US dollar, and heavy liquidation by investors.

But the pullback, though steep, only "dented" rather than "reversed" the 10-year gold rally, which started three months before the 9/11 attacks in the United States, he added.

Steel's bullish sentiment on gold is echoed by Goldman Sachs, one of the world's biggest commodity-trading companies.

A report published on Tuesday said it expects gold prices to continue to climb in 2011. On Tuesday, gold futures for June delivery gained $7.90, or 0.5 percent, to settle at $1,523.30 an ounce on the Comex in New York, the highest closing price since May 3.

The precious metal climbed to a record $1,557.40 on May 2 before retreating. It has gained 28 percent since 2010.

Steel said "easy accommodative" monetary policies by the US Federal Reserve have stimulated already high demand for commodities and commodity price rises fanned inflation fears, triggering demand for hard assets, including gold.

The eruption of discontent in the Middle East, in particular the civil war in Libya, has raised the risk of global geopolitical conflicts, which further buoyed gold, he added.

Meanwhile, the US fiscal deficit also supported the skyrocketing price of gold, said Steel.

Continued heavy US government deficit spending and warnings by the credit rating agency Standard & Poor's that the United States must restrain its fiscal spending have further spurred investor demand for hard assets, including gold, he said.

On a long-term view, Steel expects the gold rally will only come to an end after the US curbs its heavy deficit spending and loose monetary policies.

Goldman Sachs said that it predicts stronger growth in the United States in 2012.

With the current round of quantitative easing set to end in June, analysts predict that US real interest rates will begin to rise into next year, which is likely to cause gold prices to increase.