LONDON -- Spot gold has made a rather unspectacular start to 2013. The precious metal has retreated 4.7% since the start of the year to $1,580 per ounce, as improved market sentiment has driven capital flows into riskier assets and away from safe havens.
Despite the price fall, Bank of America expects bubbly central-bank activity to push gold higher again -- the bank expects the metal to surpass $1,750 per ounce as the year progresses, before finally pushing through $2,000 to fresh new peaks in 2014.
Gold set to ignite in summer heat wave
Bank of America has, in recent days, cut its gold-price forecasts for the next two years. The bank now expects the yellow metal to average $1,680 per ounce and $1,838 per ounce this year and next, down from the previous projections of $1,805 and $2,038.
Although the bank has become more cautious with its estimates, it believes that gold remains on an uptrend that should persist until 2014. The institution predicts gold to average $1,650 and $1,600 per ounce in quarters one and two before marching steadily higher from the middle of this year.
The yellow metal is expected to average $1,700 in quarter three and $1,750 in quarter four, before marching to $1,850 and $1,900 in the first and second quarters of 2014.
Central-bank buying forecast to rise
Bank of America expects central banks across the globe -- especially in developing markets -- to engage in more proactive exchange-rate management as the year progresses in response to aggressive Japanese tactics to devalue the yen.
As global growth and inflation pick up, increased U.S. dollar purchases from central banks will be needed to counter the appreciation of non-yen exchange rates, Bank of America argues. This should in turn drive up inflation, particularly in emerging regions, boosting gold interest as initial dollar purchases are eventually recycled into metal holdings.
Central banks have remained steady purchasers of gold in recent years amid fears over macroeconomic fragility and rising inflation. South Korea has bought an additional 20 tonnes of metal in recent days, taking its total holding to 104.4 tonnes. Russia and Kazakhstan bought more last month.
Official sector purchases across the globe hit 534.6 tonnes last year, according to the World Gold Council, the highest level since 1964 and up 17% from 2011.
Other factors could also drive the precious-metal price higher in the medium term, Bank of America says. It expects real rates to head lower again moving into 2014, prompting fresh gold interest. The institution anticipates rising affluence levels in emerging markets to drive gold jewelery purchases higher, too.
Mine gold stocks for gains
Investors can also gain exposure to a rising gold price through shrewd stock picks in the mining sector. Galloping demand for natural resources should continue to drive broader commodity stocks higher over the long term.
This special wealth report from The Motley Fool -- "Ten Steps to Making a Million in the Market" -- gives investors the lowdown on how to make a mint from choice stocks in the mining sector, including one major African-based gold producer. Click here now to download our totally free report.
Fool contributor Royston Wild has no position in any stocks mentioned. The Motley Fool owns shares of Bank of America. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.