A continuing decline in global gold prices is more likely than a rebound in the near future, according to a yellow paper on the world economy released by the Chinese Academy of Social Science in Beijing on Wednesday.

The yellow paper analyzed the reasons for the drop in the gold prices from the following perspectives.

The sluggish recovery of the world economy and the expectation that Fed will exit quantitative easing (QE) from early 2014 have reduced current global inflationary pressures. Combined with a significant rise in U.S. 10-year bond yields, this means that U.S. domestic long-term real interest rates will rise significantly too, said the yellow paper.

In the immediately foreseeable future, the effective exchange rate of the U.S. dollar will remain strong due to the Fed’s QE exit and the corresponding inflow of short-term international capital to the U.S. from emerging markets. As a result, emerging market economies will slow the pace of diversification of reserve assets and their demand for gold reserves may decline.

Considering that the European debt crisis has now stabilized, and the financial market in Italy, which has large gold reserves, is relatively stable, the need to raise funds through the sale of gold reserves is not strong.

The probability of a financial crisis breaking out in emerging markets is low, according to the paper. Therefore, there is less likelihood that any substantial turmoil in global financial markets will push up gold prices.

Affected by weak global demand and the appreciation of U.S. dollar, current global crude oil prices remain stable, so the risk of conflict in Syria and Iran has declined.