Bank of America shocked late Tuesday with a forecast that gold will rise to $3,000 an ounce within 18 months, a 76% increase from where we were this morning and more than 56% higher than the safe-haven asset’s all-time record high of $1,921.17, set in 2011.
And the reason? The U.S. Federal Reserve.
The prediction came in a memo to investors called “The Fed Can’t Print Gold,” and it highlights the fact that interest rates are going to remain low in the U.S. and the rest of the world for the foreseeable future in order to try and boost GDP and inflation amid the novel coronavirus pandemic.
Additionally, balance sheets will continue to rise, as will government debt loads.
“As economic output contracts sharply, fiscal outlays surge, and central bank balance sheets double, fiat currencies could come under pressure,” Bank of America analysts wrote in the report. “Investors will aim for gold.”
Bank of America Corp. expects it to hover around $1,695 an ounce this year, and then thinks gold will rise to $2,063 in 2021 before topping out at $3,000 an ounce.
BofA Says Gold Will Rise to $3K. Here’s Why That’s ‘Conservative’
While Bank of America is predicting gold will rise 76% over the next 18 months, new Money & Markets Chief Investment Strategist Adam O’Dell has been pounding the table on the precious metal since early 2018, and even more so as of late 2019.
The gold recommendations he’s put his readers into are all well above positive. In fact, one of his more speculative gold plays, issued in his Cycle 9 Alert service, is up more than 250% since February.
“I think Bank of America’s $3,000 target is conservative. The big banks will put out price targets because they don’t want to be seen as ‘missing’ a big move,” O’Dell explained. “But you’ll never see them telling clients how gold could double or even triple ahead. They’ll say $3,000 for now — and then as it’s getting there, they’ll raise their targets.”
And since O’Dell expects this to be a long-term rally for rising gold prices, there’s still time to get in on many of his recommendations.
“I wrote in early March how the GLD-to-SPY ratio will easily go from 0.5 (current) to 0.9 — no matter whether stocks go up or down. Since then, the ratio has made only 20% of the move I’m expecting, so there’s still time to get in on gold,” he said. “But the window of prime opportunity won’t last forever. Folks are already starting to catch on.”
“In fact, the ratio’s four-week rate of change hit 22% the week ending March 20. That’s the sixth highest four-week increase in the ratio’s history — and 3.5 standard deviations from the average change. It shows the sudden and dramatic shift in sentiment — in favor of gold, over stocks.”
So how high does O’Dell expect gold will rise?
About 250% — and that’s just in the next 18 months. In fact, O’Dell sees gold rising to $10,000 in the long run.
“There are a lot of uncertainties right now, but if stocks trade back up to their February highs and if the gold-to-stock ratio moves to what it was in summer 2011, gold could be priced at $5,500 an ounce. That’s nearly 250% higher than it is today,” he said. “Bank of America would look too bold calling for that right out of the gate. But I won’t be the least bit surprised to see it blow past $3,000, even in their 18-month time frame.”
Editor’s note: Adam O’Dell is the Chief Investment Strategist for Money & Markets and editor of Green Zone Stocks, Cycle 9 Alert and 10X Profits.