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More Mainstream Bullishness for Gold

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Earlier this week, we reported Goldman Sachs now forecasts record gold prices within the next 12 months. Well, Goldman isn’t the only mainstream player turning more bullish on gold.

In a note published Tuesday, Bank of America said gold can hit record highs before the end of 2020 if its rally continues to breach key resistance levels.

The breakout occurring now that is ending Q2 completes an eight-week trading range that has resumed higher,” Paul Ciana, technical strategist at Bank of America, wrote. “These patterns say gold can make a new all-time high in [the second half of 2020] with Q3 on our mind.”

Ciana said $1,800 will be a key resistance level to keep an eye on.

Meanwhile, SGMC Capital Founder & CEO Massimiliano Bondurri told Bloomberg he thinks gold may hit close to $2,000 by the end of this year and could rally further due to dollar weakness.

It can rally much, much further than here, for a number of reasons. First of all, we expect dollar depreciation to continue, so that’s likely to benefit gold. This uncertainty overall on the market, on the economic environment, is just going to keep the price of gold supported as a safe haven. Eventually, there are going to be people starting to worry about inflation. Not now, but probably more down the road. And again, gold is a good hedge for that. Therefore, we can very easily see it close to $2,000, even by year-end, and potentially even breaking out more, because the dollar depreciation, once it comes … is going to have some way to go.”

Bondurri also said there is a major disconnect between the stock market and the actual economy.

The reason for that is the massive monetary and fiscal stimulus that we are experiencing. And therefore, even though the economic numbers will be appalling this year because of the virus, valuations are likely to anyways remain supported thanks to the very large amount of monetary and fiscal stimulus, the amount of liquidity which is being injected into the system. And overall, just the signals by central banks and governments that they’re always there ready to do more.”

Bondurri reiterated that the market has “gone ahead of itself” in terms of valuations.

There will come a time of reckoning with this.”

Edison Investment Research is even more bullish, saying gold has the potential to go as high as $3,000.

In its gold report, Edison director Charles Gibson wrote that Federal Reserve monetary policy is extremely supportive of gold.

With the total US monetary base now at US$5.1tn (and given the close historical correlation between the two), the gold price could very reasonably be expected to rise to US$1,892/oz and potentially as high as US$3,000/oz.”

Gibson emphasized the historical correlation between the money base and the price of gold.

The reason this is significant is because, since 1967, the price of gold has shown an extremely strong (0.909) correlation with the total US monetary base. Gibson. The more dollars that either are, or could be, in circulation, the higher the expected gold price.”

He said with the Fed engaged in QE infinity – essentially unlimited bond-buying – the sky’s the limit.

Anecdotally, there is some evidence to suggest the Fed has already spent close to US$2tn buying bonds to date, which, all other things being equal, should take the total US. monetary base to a record US$5.5tn and the gold price to over US$2,000/oz and potentially as high as US$3,281/oz.”

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