Despite the risk of some near-term volatility and potential consolidation, gold and silver remain in unstoppable uptrends as Bank of America expects prices to reach $5,000 and $65 an ounce, respectively, next year.
The bank forecasts gold prices will average around $4,438 an ounce for the year, with silver averaging $56.25 an ounce.
Bank of America was among the first institutions to highlight gold’s path to $4,000, and now that this target has been achieved, the analysts have set their sights higher.
“The White House's unorthodox policy framework should remain supportive for gold, given fiscal deficits, rising debt, intentions to reduce the current account deficit and capital inflows, along with a push to cut rates with inflation around 3%,” the analysts said.
The precious metals team led by Michael Widmer said it expects a 14% increase in investment demand to drive gold prices to $5,000 an ounce. They also see a potential path to $6,000.
“For a rally to $6,000/oz, investors need to increase their purchases by 28% — not impossible, but a tall order,” the analysts said.
Although BofA remains bullish on both gold and silver, the analysts noted an elevated risk of consolidation.
“ETF purchases rose by 880% year-over-year in September to an all-time high of USD 14 billion; similarly, total physical and paper gold investment almost doubled to above 5% of global equity and fixed income markets,” the analysts said. “As such, we believe that markets could consolidate in the near term.”
Along with gold, the commodity analysts see solid potential for silver, even as overall demand continues to weaken.
“Although we expect an 11% decline in silver demand next year, we still anticipate another deficit, which should support the white metal,” the analysts said.
They added that the primary risk for silver lies in shifting demand within the solar power sector. BofA expects silver consumption in photovoltaic solar panels to peak next year.
