* HSBC sees gold prices at average $1,700/oz in 2013
* Forecasts cut in response to 4 pct price drop this year
* Ultra-loose monetary policy still major driver
LONDON, March 18 (Reuters) - HSBC cut its gold forecast for this year and next on Monday after the metal's weak start to the year, but said ultra-loose monetary policy in the United States and elsewhere meant it remains positive on prices overall.
The bank lowered its 2013 gold price forecast to $1,700 per ounce from $1,760 and the 2014 price outlook to $1,720 per ounce from $1,775. It sees the metal trading between $1,525 and $1,825 an ounce this year.
Gold prices are down 4 percent in the year to date, primarily due to investor expectations the Federal Reserve would curb its U.S. quantitative easing (QE) programme, and have fallen for the last five months straight.
"Later in 2013, we expect monetary easing, escalating currency wars, and geopolitical tensions to support gold prices up to $1,800 an ounce," the bank said in a note. "Increased inflationary expectations should buoy gold."
Any price drop below $1,600 per ounce may stimulate jewellery, coin and small bar retail demand in price-sensitive economies, HSBC said.
It expects bar hoarding to increase 16.9 percent this year to 1,100 tonnes, and sees jewellery offtake recovering to 1,960 tonnes, up 2.7 percent, after two years of declines.
The bank expects investment in gold-backed exchange-traded funds, holdings of which fell by a record amount last month, to drop to 50 tonnes this year from 279 tonnes in 2012.
"Further ETF or Comex liquidations could put additional pressure on gold prices," it said. "That said, we believe the bulk of ETF investors have a proven buy-and-hold mentality and are content to hold onto their positions."
It sees strength in bar and coin demand offsetting a drop in interest in ETFs and expects investment in gold to decline by only 20 tonnes this year to 1,515 tonnes.
"U.S. labor market conditions have still not improved sufficiently to cause the Fed to end QE," it said.
"Accommodative monetary policy has been a mainstay of the gold rally, and until that policy changes, we believe the bull market will remain intact."