Bank of America Expects Gold Prices to Soar to $1,350 in 2019
In the past few years, it seemed as if the whole world was bearish on gold. The yellow precious metal was called a pet rock, a useless asset, and other such names.
Here’s the thing: we are seeing that sentiment change.
Big banks turned bearish on gold back in 2013. Since then, they haven’t shown much interest in the precious metal. But now they are coming out in favor of gold again.
The banks’ arguments for higher gold prices aren’t anything surprising. I have been talking about them for some time now. Nevertheless, it’s important to pay attention to what the banks are saying.
Consider Bank of America Corp (NYSE:BAC). Not too long ago, it came out with a fairly bullish target for gold. It expects gold prices to average $1,350 in 2019. Just so you know, that’s 13% above where the metal currently trades.
Why the bullish take?
The head of global commodities and derivatives research at Bank of America, Francisco Blanch, said, “In the short run, the effects of strong dollar, higher rates dominate [sic]. But in the long run, a huge U.S. government budget deficit is pretty positive for gold.” (Source: “Gold Set to Soar Above $1,300, Bank of America Says,” Bloomberg, September 23, 2018.)
He also mentioned that trade wars could take a toll the U.S. economy, which could be bullish for gold.
“It could take longer, it could take shorter, eventually it’s going to happen, but maybe the Fed acknowledges it sooner, which is what people are going to be looking for in terms of getting more bullish on gold. We know that trade wars are not good for the economy,” said Blanch. (Source: Ibid.)
Keep in mind, Bank of America isn’t the only big bank turning bullish on gold. The list of big banks looking at gold positively is becoming longer—and not just in the United States.
What’s Next for Gold?
Dear reader, as I said earlier, it’s important to watch what the big banks are saying.
Why? Because big banks are followed closely by big investors, and they manage a lot of money. If the big banks and big investors turn bullish, we could see a lot of buying.
Here’s another thing: big banks turning bullish could put gold on the radar of investors who may have not been looking at it. In other words, big banks could make gold interesting again to those who have ignored it.
With all this in mind, it’s very difficult to be pessimistic about the yellow precious metal. I believe that banks are making a very bullish case for higher gold prices in 2019. I wouldn’t be shocked if gold exceeds big banks’ expectations next year.
Furthermore, I am paying very close attention to gold mining stocks. They are selling at a very deep discount. If gold increases in price, mining stocks could provide massive returns.
Consider that if a gold miner can produce gold at $900.00 an ounce, with gold at $1,200, the mining company earns a profit of $300.00. If the price of gold goes up to $1,300 and the production price remains the same, the miner’s profit becomes $400.00, which is 33% higher.