BofA hikes target for gold 18 months ahead by half

Strategists at Bank of America hiked their target for gold prices in 18 months' time by half in anticipation of central banks and governments doubling the size of their balance sheets and fiscal deficits, respectively.

BofA now expected the yellow metal to hit $3,000/oz., versus a prior price forecast of $2,000/oz..

Marking to market, BofA's forecast for the average price of gold in 2020 was $1,695/oz. and for $2,063/oz. for 2021.

Central banks' balance sheets had remained "stable" at between 21% to 28% of gross domestic product over the past decade, much like the price of gold, but that was about to change, the investment bank's strategists said.

On the flip-side nevertheless, they cautioned that "a strong USD backdrop, falling equity market volatility, and weak jewelry demand in India & China may remain headwinds."

"Beyond traditional gold supply and demand fundamentals, financial repression is back on an extraordinary scale. Rates in the US and most G-10 economies will likely be at or below zero for a very long period of time as central banks attempt to push inflation back above their targets.

"Beyond real rates, variables such as nominal GDP, central bank balance sheets, or official gold reserves will remain the key determinants of gold prices, in our view."