Gold Could Reach $3,000 An Ounce In Next 12-18 Months According To BofA By Investing.com

Gold Could Reach $3,000 An Ounce In Next 12-18 Months According To BofA By Investing.com
Gold Could Reach $3,000 An Ounce In Next 12-18 Months According To BofA By Investing.com

Analysts at Bank of America (NYSE:) predict a potential price increase of , with estimates reaching $3,000 per ounce in the next 12 to 18 months. However, they recognize that current market flows do not necessarily support this price.

BofA explains that reaching $3,000 depends on an increase in non-commercial demand. She believes that a cut in interest rates from the Federal Reserve could trigger this demand, leading to an influx of capital into physical gold-backed ETFs and an increase in trading volumes.

Central bank purchases are another key factor. “Continued purchases by central banks are also important, and the desire to reduce the share of USD in foreign exchange portfolios will likely lead to increased purchases of gold by central banks,” BofA says.

This development is driven by gold’s status as a long-term store of value, inflation hedge, and effective portfolio diversification.

BofA’s model takes into account different factors, including mining production, recycled gold and jewelry demand. However, to estimate a balanced market price, investment demand must also be taken into account. Currently, non-commercial purchases support an average year-to-date price of $2,200 per ounce. A significant increase could push prices towards $3,000.

The report highlights a recent survey from the World Gold Council indicating that central banks intend to buy more gold. This trend aligns with growing concerns about the fragility of the U.S. Treasury market, which could prompt central banks and private investors to further diversify into the gold sector.

Although a Treasury market collapse is not BofA’s base case scenario, the firm recognizes that it is a potential risk. “In this scenario, gold could initially fall due to massive liquidations, but then it should appreciate,” they conclude.

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