Bank of America (BofA) strategists reaffirmed on Tuesday their forecast that gold prices could reach $3,000 per ounce within the next year. This projection, first introduced in late 2023, has maintained the bank’s bullish outlook on gold, which has already seen a 21% increase in value year to date.
“We believe gold can hit $3,000/oz over the next 12-18 months, although current market flows do not yet justify that price level,” BofA analysts stated. They emphasized that achieving this target would require an uptick in non-commercial demand, likely driven by anticipated cuts in U.S. interest rates.
The strategists noted that early indicators of this demand shift could include rising inflows into physically backed exchange-traded funds (ETFs) and increased clearing volumes on the London Bullion Market Association (LBMA). Central bank purchases also play a critical role, as efforts to diversify away from the U.S. dollar in foreign exchange reserves may lead to further gold acquisitions.
BofA’s rates strategists also pointed out the potential fragility of the U.S. Treasury market, warning that it could be one significant shock away from major disruption. In such an event, gold prices might initially dip due to widespread liquidations but are expected to recover, mirroring patterns seen in similar past occurrences.
Gold prices remained stable on Tuesday, with investor attention now focused on upcoming U.S. jobs data, which could provide further insights into the Federal Reserve’s expected rate cuts later this month.
As of 1111 GMT, spot gold was priced at $2,498.87 per ounce, following a dip to a more than one-week low in the previous session due to a stronger U.S. dollar. U.S. gold futures edged up slightly by 0.1% to $2,530.70.
According to Quantitative Commodity Research analysts, the gold market is currently navigating the uncertainty between the potential depth of the Fed’s rate cuts in September and the likelihood of further reductions in future meetings.
Market sentiment reflects a 31% probability of a 50 basis point rate cut at the Fed’s September 17-18 meeting, with a 69% chance of a quarter-point cut. Investors are also closely monitoring Friday’s U.S. payrolls report, along with ISM surveys, JOLTS job openings, and the ADP employment report for more clues on the Fed’s rate-cutting trajectory.
