The coronavirus health crisis has dismantled most sectors of the global economy. Most of the economies are faced with the potentials of recessions and depressions. But, central banks and governments are striving to introduce fiscal and monetary policies that will ease the financial burden on the people.
But some analysts and commentators in the precious metals markets believe that gold will surge in the coming months. Gold is mostly considered as a haven asset. Thus, when its price increase, it means in most cases that the global fiat economy is dwindling. That may spell doom for the world economy in the middle-term.
Bank of America Corp. raised its 18-month gold-price target to $3,000 an ounce. That price is more than 50% above the existing all-time high for the precious metal. The forecast was made in a report titled “The Fed can’t print gold.”
The bank decided to increase the price target from $2,000 previously in the wake of policymakers around the world introducing huge amounts of fiscal and monetary stimulus packages to mitigate the effects of the COVID-19 pandemic on their economies. Michael Widmer and Francisco Blanch said in the report:
“As economic output contracts sharply, fiscal outlays surge, and central bank balance sheets double, fiat currencies could come under pressure. Investors will aim for gold.”
Bank of America expects that bullion will average at $1,695 an ounce this year and $2,063 in 2021. The all-time high of $1,921.17 was set in September 2011. Spot prices traded at around $1,678 on April 21 and are currently up 11% in 2020.
Expectedly, reduced financial market volatility, a strong dollar, and lower jewelry demand in China and India may remain headwinds for the precious metal. The report concluded by stating:
“But beyond traditional gold supply and demand fundamentals, financial repression is back on an extraordinary scale.”
For now, everyone is in a wait-and-see mode awaiting the next price action for gold.