Gold to hit $2,000 in 2014?

Central-bank buying set to push gold to 13th consecutive annual rise

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 heatwave

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 US 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 macro-economic 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 jewellery 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.

Kuwaiti property company St Martins is making a play to buy 70 Gracechurch Street in the City of London for £210m.

 

St Martins is in talks to buy the off-market EC3 City trophy following a spate of recent interest in the property.
The negotiations are said to be in a state of flux given 70 Gracechurch Street is not formally on the market and talks with various parties remain ongoing.

St Martins has been actively seeking investment opportunities in London in recent weeks. In January it completed its purchase of 5 Canada Square in Canary Wharf, E14, from Evans Randall for £385m, reflecting a yield of 5%.

Last year it made an off-market approach to buy Ropemaker Place for around £500m, and also bid in November to buy 5 Aldermanbury Square for £225m, reflecting an initial yield of 5.33%.

DTZ was instructed to sell 70 Gracechurch Street in April 2011 for around £200m, reflecting a 5.3% yield, in what was one of the largest off-market assets to become available in London that year. However the building was later withdrawn owing to a significant movement in swap rates.

Any buyer for the asset would purchase the special purpose vehicle in which the 180,000 sq ft block is held.

The development has been an attractive prospect for some investors because of the fixed annual rental uplift agreements in place with current tenants. The building is let on long term leases to insurer XL Group and Marks & Spencer, which occupies a 90,000 sq ft store at ground level.

All parties declined to comment.