Will gold surge 50% above its record to hit $3,000 per ounce?

"A strong USD backdrop, falling equity market volatility, and weak jewelry demand in India & China may remain headwinds."

  
Image used for illustrative purpose. 1 kg. gold bars are seen on a production line in Ahlatci Metal Refinery in the central Anatolian city of Corum, Turkey, May 11, 2017.

Image used for illustrative purpose. 1 kg. gold bars are seen on a production line in Ahlatci Metal Refinery in the central Anatolian city of Corum, Turkey, May 11, 2017.

REUTERS/Umit Bektas

One of the biggest US banks, Bank of America (BofA), has a bullish view on the gold and expects the prices of the yellow metal to hit the $3,000 mark per ounce in the next 18 months, according to its latest report titled, 'The Fed can’t print gold'.

"As central banks and governments double their balance sheets & fiscal deficits we up our 18m gold target from $2000 to $3000/oz," BofA said in its report, adding, "A strong USD backdrop, falling equity market volatility, and weak jewelry demand in India & China may remain headwinds."

According to the report, the precious metal is the "ultimate store of value," and its prices have performed very well in the last 15 months compared to other asset classes.

Though there was a hard sell-off in March, gold traded around $1678, representing 11 percent growth this year, the report said.

Due to the coronavirus lockdown, US GDP could go down by 30 percent y-o-y in 2Q20, the steepest drop in modern history.

Beyond traditional gold supply and demand fundamentals, financial repression is back on an extraordinary scale. Rates in the US and most G-10 economies will likely be at or below zero for a very long period of time as central banks attempt to push inflation back above their targets, the report said.

According to BofA, beyond real rates, variables such as nominal GDP, central bank balance sheets, or official gold reserves will remain the key determinants of gold prices.

(Writing by Seban Scaria seban.scaria@refinitiv.com; editing by Daniel Luiz)

#GOLD #COMMODITIES #MARKETS

Disclaimer: This article is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Read our full disclaimer policy here.

© ZAWYA 2020


More From Commodities