Bank of America says that gold is on the cusp of smashing through the price ceiling to a record new high, with a target of £2,004/oz ($2,500) for later this year.
The bank’s analysts say just a marginal increase in investor demand would send gold to stratospheric new highs in the coming months. “Bottom line: non-commercial purchases do not need to increase materially to justify gold hitting £2,004/oz ($2,500) this year,” they advise.
Like many industry observers, Bank of America expects that the Federal Reserve will hit pause on its cycle of rate hikes even though inflation remains high. This would be great news for gold because real interest rates would no longer be a barrier to runaway price increases.
“Influenced by the recent banking turmoil, markets are pricing imminent rate cuts. At the same time, core inflation has been sticky and elevated price pressures, for example in shelter, highlight the risk of second round effects,” the commodity analysts added. “This confirms our long-held view: central banks have no silver bullet for fighting inflation and this should ultimately bring investors back to the market. The end of the hiking cycle will be critical for the yellow metal.”
Another propellent towards higher price is the move away from the U.S. dollar. With central banks acquiring gold at an unprecedent pace last year, it remains a heavily favourable factor for the bulls and could lead to a faster rate of gains.
The bank’s strategists explained, “Terms of trade, current account balances, and ultimately gold prices are all interconnected. Outright de-dollarisation is mentioned by only a handful of central banks. Yet the global economy is now moving towards a multi-polar world, reflected for instance in reports that Saudi Arabia is considering quoting oil in CNY. And the US currency in official foreign exchange reserves has fallen from around 70% two decades ago to 58% at present.”
Bank of America’s most modest expectation for gold is for the yellow metal to hit £1,761 ($2,200) by the end of the year. Don’t wait for prices to hit those heights. Act fast. Buy now.
