Bank of America
Bank of America (or BofA) analysts contend that gold prices (GLD) should surge over the next year. The firm stated that higher real US interest rates, a strong US dollar (UUP), and equity market volatility have kept a lid on gold prices year-to-date. BofA, however, believes that as the equity markets (SPY) (IVV) are showing increased volatility (VIX), the Fed will have to eventually slow down. The bank also predicts that inflation (TIP) pressures will build up, which should further support gold. It also attributes growing US debt and deficits to a higher gold price outlook. It’s forecasting prices of $1,400 per ounce for gold by the end of 2019.
Wells Fargo analysts are also quite bullish on gold. While Bank of America analysts believe that equity market volatility will be the source of higher gold prices, Wells Fargo believes that even if equities rally, precious metal prices will rise. It’s forecasting prices to rise by 7% from current levels. Its rolling 12-month gold target is $1,300 per ounce. As reported by Kitco, Wells Fargo stated, “Gold’s relative value looks appealing too, as it is cheap vs. both stocks and bonds.”
However, not all the analysts are as bullish on gold prices. TD Securities believes that the US dollar and global macro data releases will be the two biggest factors that will impact gold in the short term. Its analyst Bart Melek feels that the Fed’s rate hike expectations and the firm US dollar should keep pressure on gold prices until a macro catalyst emerges. Macquarie also feels that gold could struggle throughout the rest of year.
While analysts have differing views about the gold price outlook, gold ETFs have started seeing inflows. We’ll discuss this in more detail in the next part of this series.