Gold will extend declines this year as gains in equity markets reduce the need for haven assets and increased regulation hurts risk appetite, according to Morgan Stanley, which lowered its bullion forecasts.

The 2014 target was cut 12 percent to $1,160 an ounce and the prediction for 2015 reduced 13 percent to $1,138, analysts Peter Richardson and Joel Crane wrote in a report Wednesday. Gold remains under pressure as the global recovery gains traction, increasing the risk of higher interest rates, they wrote.

Bullion’s 12-year bull run ended in 2013 as Federal Reserve policy makers decided to cut monthly bond purchases that fueled gains in asset prices while failing to stoke inflation. Prices sank 28 percent last year, capping the biggest annual decline since 1981. Morgan Stanley’s view adds to bearish forecasts for gold from Goldman Sachs Group Inc. to ABN Amro Group NV.

“Price performance will continue to suffer as long as risk assets in general and U.S. equities in particular continue to perform strongly, undermining the need for portfolio managers to hold more than a modicum of safe-haven assets,” the analysts wrote. There’s “more pain to come,” they said.

Gold for immediate delivery traded little changed at $1,239.75 at 8:47 a.m. in London, after averaging $1,410.89 in 2013 and $1,668.75 in 2012. The Standard & Poor’s 500 Index posted its biggest annual gain since 1997 last year as holdings in gold-backed exchange-traded products shrank 33 percent, or 869 metric tons, according to data compiled by Bloomberg.

Bullion will fall to $1,050 in the next 12 months as the U.S. central bank pares stimulus, Goldman analysts wrote in a Jan. 12 report. Gold may end 2014 at $1,000 an ounce, ABN said Jan. 10. Prices will average $1,219 this year, a London Bullion Market Association survey of traders and analysts showed.

Assets in ETPs will contract 200 tons this year and a further 150 tons in 2015, said Morgan Stanley. While lower prices may boost physical demand in China, that won’t reverse the slump spurred by investors reducing their net-long position in futures and cutting ETP holdings, Richardson and Crane wrote.

Increased demand in China, which probably overtook India as the world’s largest consumer last year, helped gold rebound from a six-month low of $1,182.52 on Dec. 31. China imported 1,017 tons of gold from Hong Kong in the first 11 months of 2013, almost double 2012’s total, Hong Kong government data show.

Federal Reserve policy makers meet Jan. 28-29 after deciding at their gathering last month to cut monthly bond purchases as the U.S. economy improved. The Fed’s benchmark interest rate will rise in 2015, said Olivier Blanchard, chief economist at the International Monetary Fund, which Tuesday raised its global growth outlook as advanced economies improve. (Bloomberg)