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What’s Driving Analyst Optimism about Gold?

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Bank of America

Bank of America (or BofA) contends that gold prices (GLD) should surge over the next year as US budget deficit and trade war concerns start to have an impact on the US economy (SPY) (IVV). Bank of America expects gold prices (IAU) to average $1,350 per ounce in 2019 as the effect of US tax reforms wears off.

According to a Bloomberg article, BofA’s head of global commodities (COMT) and derivatives research said, “We’re still pretty constructive longer term on gold.” He added, “In the short run, the effects of strong dollar, higher rates dominate. But in the long run, a huge U.S. government budget deficit is pretty positive for gold. He also believes that trade wars are negative for an economy and they will “come back to bite the US.”

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Goldman Sachs

Goldman Sachs (GS) also sees gold rising to $1,325 per ounce in 12 months’ time. While the bank cut its price forecasts for gold in September, it still sees the metal to be at $1,250 per ounce in three months and $1,325 per ounce in the next one year. The bank cut its average price by $100 per ounce after gold’s downtrend since April continued. It expects strong demand for gold due to renewed emerging market (EEM) demand.

Royal Bank of Canada

Similar to GS, Royal Bank of Canada (or RBC) also reduced its price forecasts for gold while at the same time projecting higher prices going forward. It expects gold prices to average $1,266 per ounce in the fourth quarter as compared to its previous estimate of $1,281 per ounce. Its current forecast for 2019 is $1,338 per ounce, down from $1,351 per ounce previously. According to Kitco, RBC analysts said, “Although this weakness could linger, we remain of the view that gold prices reside stubbornly below fundamentally justifiable levels.” They also believe that the current gold price is a good entry point for investors.

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