Although gold prices have dropped from recent peak levels, they are still hovering above $2,300. According to Bank of America analysts, the gold market is currently going through a period filled with uncertainties. However, a significant increase in gold prices is expected due to the Federal Reserve’s interest rate cuts and the increasing debt in the economy.
Gold Prices According to Bank of America Analysis
According to Bank of America commodity strategist Michael Widmer’s report, there is a potential for gold prices to reach $3,000 per ounce in the next 12 to 18 months. However, for this to happen, there needs to be a recovery in investment demand.
Tailwinds in Gold Prices
The bank’s analysts view the increasing volatility in bond yields as a positive factor for gold prices. They also mention that the reduced exposure of central banks worldwide to the U.S. dollar and Treasury bonds continues to support the value of gold as a safe reserve asset. Particularly, China’s strong position in gold and Treasury bonds is emphasized.
Safe Haven Search and the Gold Market
A potential collapse in U.S. Treasury bonds is not a scenario foreseen by Bank of America analysts. However, increasing risks in the global economy and the fragile outlook of the U.S. bond market create uncertainties in the markets. Analysts point out that the rapid increase in government debts could challenge market makers and pose a risk of liquidity shortage. This situation could trigger a ‘safe haven’ search for the gold market.