Bank of America Predicts Gold Prices Could Hit $3,000 Next Year
Bank of America strategists are maintaining a bullish stance on gold, projecting that the price could reach $3,000 per ounce by 2025. With gold prices already up 21% year to date, the precious metal appears to be on track to meet this target. Analysts believe that gold can hit $3,000/oz over the next 12-18 months, although current flows do not justify that price level.
The team at BofA thinks that reaching the $3,000/oz target would require an increase in non-commercial demand, which in turn would necessitate US interest rate cuts. Early indicators of this shift would include a rise in inflows to physically backed ETFs and an increase in LBMA clearing volumes. Additionally, ongoing central bank purchases are crucial in driving further buying as efforts to reduce the share of the US dollar in foreign exchange reserves continue.
BofA’s rates strategists have also highlighted potential instability in the U.S. Treasury market, suggesting that it is one shock away from significant disruption. In such a scenario, gold might initially drop due to broad liquidations but is expected to rebound, as seen in similar past events.
Gold prices held steady on Tuesday, with market attention turning to upcoming U.S. jobs data, which could provide insights into the extent of the Federal Reserve’s anticipated rate cuts this month. Gold was priced at $2,498.87 per ounce by 1111 GMT, with U.S. gold edging up to $2,530.70.
According to analysts at Quantitative Commodity Research, the gold market is currently torn between assessing the depth of the Fed's potential rate cuts in September and anticipating further cuts in subsequent meetings. Traders see a 31% probability of a 50 basis point rate cut at the Fed's Sept. 17-18 meeting, with a 69% chance of a quarter-point cut.
Investors will closely watch Friday's U.S. payrolls report, along with ISM surveys, JOLTS job openings, and the ADP employment report for further clues on the Fed’s rate cut strategy.
In conclusion, Bank of America's prediction of gold prices potentially hitting $3,000 next year is based on factors such as non-commercial demand, US interest rate cuts, and central bank purchases. The market is currently assessing the Fed's rate cut strategy, with upcoming economic data providing insights into future policy decisions. Investors should monitor these developments to make informed decisions about their investments in gold.