Bank of America
Bank of America Merrill Lynch is overweight on precious metals in 2019. One of the key arguments that Bank of America has, which supports its bullish gold price outlook, is “de-dollarization.” Many countries, including Russia (RSX), China (FXI), and Japan are unloading their US-dollar denominated debt in favor of gold. The process has implications for the US dollar (UUP), which benefits gold prices (GLD).
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Central banks loading up on gold
As we highlighted in Central Banks Purchased the Most Gold in 50 Years in 2018, according to World Gold Council, the annual gold demand increased 4% in 2018—the highest amount of gold buying by the central bank in the last 50 years. Central banks were on a gold-buying spree in 2018. In 2018, central banks bought 651.5 tons of gold—the second-highest total on record.
What’s even more bullish about the gold price outlook is that apart from the usual suspects like Russia (RSX), Turkey, and Kazakhstan, there were some unconventional buyers in the market including India (INDA) and European countries (HEDJ).
More gold holdings
Central banks are citing portfolio allocation, growing trade disputes, and growing geopolitical tensions as the major reasons for de-dollarization.