'The Fed Can't Print Gold,' Bank of America Says
Apr 21, 2020 2:59PM EDT
Bank of America’s analysts also make the case for three senior gold miners.
Bank of America’s strategists see gold hitting $1,800 an ounce in 18 months.
Gold’s not having a good day—but that hasn’t stopped Bank of America for upping its target on the precious metal to $3000.
Everyone has their reason for liking gold. Some like gold as an inflation hedge. Others like it as protection against increased uncertainty. Still others want to own it in case they have to flee their home country in the middle of the night, even if that seems a bit extreme. And right now people want to own gold.
Gold’s recent run began back at the end of September 2018, when the precious metal was trading at $1,465.70. Since then, it’s gained 15% to $1,689.60 And if Bank of America’s Michael Widmer and team are right, the precious metal is heading a lot higher. Like 78% higher, to $3,000. The reason? “The Fed can’t print gold.”
Widmer expects rates to be low in the U.S. and the rest of the world for a very long time as central banks try to boost GDP growth and inflation. They’ll also be increasing the size of their balance sheets, while government deficits balloon. “Another important point to remember is that, just as central banks are socializing risk in financial markets, governments are increasing their spending like never before during peacetime,” he writes. “Investment demand has correlated strongly with gold prices in recent years, and we expect precisely this group of buyers to drive gold prices higher.”
Is it going to be a straight line? Absolutely not. Gold will have to wrestle with a strong U.S. dollar and reduced demand from places like India and China. That shouldn’t stop gold from hitting $3,000 fin 18 months, Widmer writes.