Bank of America Corp. (NYSE:BAC) raised its 18-month gold-price target to 3,000 oz more than 50% above the existing price record in a report titled “The Fed Cannot Print Gold.”
The bank increased its target from 2,000 previously, as policy makers across the globe open huge amounts of fiscal and monetary stimulus to help bolster economies damaged by the COVID-19 coronavirus.
“As economic output contracts sharply, fiscal outlays surge, and central bank balance sheets double, fiat (paper) currencies could come under pressure,” analysts said in the report. “Investors will aim for gold.”
BofA expects gold to average 1,695 oz this year and 2,063 oz in Y 2021. The record of 1,921.17 was set in September 2011. Spot prices traded around 1,678 Tuesday + 11% YTD.
A strong USD, reduced financial market volatility, and lower jewelry demand in India and China could remain headwinds for gold in the mid-term.
“But beyond traditional gold supply and demand fundamentals, financial repression* is back on an extraordinary scale,” the report said.
Editor’s Note: *Financial repression is a term that describes measures by which governments channel funds from the private sector to themselves as a form of debt reduction. The overall policy actions result in the government being able to borrow at extremely low interest rates, obtaining low-cost funding for government expenditures. This action results in savers earning rates less than the rate of inflation and is therefore repressive.
Have a healthy day, Keep the Faith!