Driven by various factors, including the growing demand for the precious metal by central banks and the inflow of capital into exchange-traded funds backed by gold.
Bank of America (BofA) expects the price of a troy ounce of gold to climb to US$3,000 in a period of 12 to 18 months due to the confluence of several factors, among which the demand for the precious metal by consumers stands out. central banks.
The entity details in a report that the catalysts required to meet this bullish forecast are a recovery in demand, the interest rate cut by the United States Federal Reserve (Fed) together with the purchases of central banks, the capital inflows into gold-backed exchange-traded funds (ETFs) and increased trading volume in the London bullion market.
According to the market data consulted, the troy ounce of gold was trading above US$2,300 this Monday and, so far this year, it has accumulated a revaluation of 13%, although the annual maximum was reached on December 20. May at US$ 2,450.
The study has gone to great lengths to highlight that ongoing purchases by central banks are important, while their push to reduce the dollar's share of currency portfolios will likely lead to more gold purchases.
This phenomenon, known as 'de-dollarization' (the dollar is the world's main currency), has accelerated due to successive geopolitical crises and the greater fragmentation of the international order.
In that sense, Bank of America has indicated that the latest survey by the World Gold Council has confirmed that monetary authorities are seeking to increase their purchases of gold.
The reasons given for increasing these purchases are found in the long-term store of value of gold and the coverage it offers against inflation, performance in times of crisis, portfolio diversification and the absence of risk.
All in all, they have pointed out that, although central banks' motivations for owning gold may vary, they all tend to have one thing in common: the proportion of dollars in portfolios has been decreasing.
In that sense, the entity's report has estimated that Chinese holdings of US Treasury bonds have fallen by US$102 billion in the last twelve months, while gold reserves have increased since January 2023 by eight million ounces. , equivalent to US$51,000 million.
Thus, BofA commodity strategist Michael Widmer has recapped that central banks have had a variety of reasons for reducing their dollar participation in currency portfolios, including the realignment of reserve currencies and foreign exchange with which countries actually trade.
"More recently, there has also been some concern about the dominance of the dollar in the global economy and the health of the US currency," the expert added as another factor in this geopolitical instability and this "progress towards a multipolar world."
Linked to this point, Widmer has maintained that, according to Rates Reserach analysts, a collapse of the United States Treasury is not the base scenario, but it is a growing tail risk: "The US bond market is one shock away. to stop working without problems," he stated.
This should drive more gold purchases by central banks, according to the report, which has also assured that it will attract the interest of private investors.
On the other hand, BofA has also explained in a more technical section that the estimate is made on a series of factors that also reflect mining production, recycling supply and jewelry demand.
At this point, they have indicated that non-commercial purchases increased around 3% in the first quarter of the year, enough, according to the entity, to justify an average gold price of US$ 2,200. In this way, they have maintained that, if these purchases continue to rise, an ounce of gold could reach US$3,000.
RECENT QUOTE
The price of gold resurfaced strongly due to the return to the foreground of the Palestinian-Israeli conflict, while since last October 7 - the day of the attack by the Islamist Hamas militia on Israeli territory - the metal has accumulated a revaluation of more than 27 %.
In this way, driven by geopolitical risks and massive purchasing by central banks, gold reached a new level in early December for its historical records above US$2,100 and has subsequently been beating that mark. until exceeding US$2,400 this past spring.
Prior to that bullish streak last fall, the last time gold traded above US$2,000 was in May 2023 due to the tension in the Ukrainian conflict and the blows derived from the US regional banking crisis, as well as the bankruptcy of Credit Suisse last March, such that its value reached a value of US$ 2,063 at the beginning of May.
However, the previous all-time high for gold compared to the current streak occurred on March 7, 2022, when the ounce touched US$2,075, beginning two weeks before the Russian invasion of Ukraine. At the same time, it was also around those levels in August 2020 after the outbreak of the pandemic.
