By Sean Kelly

Leading Bank Sees Much Higher Gold Price!

2020 just passed the halfway mark with gold roaring higher.

In the first six months of the year gold outperformed almost every other investment class by climbing about 17 percent.

Now, as the second half of the year gets underway, gold is keeping up the pace.  As we write this it is trading at over $1,800 an ounce.

That is a nine-year high.

In May we posted a piece titled US Money Printing Goes Stratospheric! The “Smart Money” Goes for Gold!

It described the Federal Reserve’s digital money-printing that fills the gap when the government is in debt up to its eyeballs.  We concluded the piece noting that one of the nation’s largest banks had just announced it was raising its target for gold prices to $3,000.

What does one of the largest banks in the world think?

Bank of America, one of the largest banks in the world, made that announcement under the title, “The Fed Can’t Print Gold!”

Last week the author of that report, Francisco Blanch, BofA’s head of commodities and derivatives research, appeared on the Bloomberg show “The Open” to explain why the bank has raised its 18-month price target for gold.

“As central banks and governments double their balance sheets and fiscal deficits respectively…  we have also decided to up our 18-month gold target from $2,000 to $3,000 per ounce.”

Here are the three reasons for this gold price prediction.

“There are three things to keep in mind,” Blanch said. “First of all, fiscal policy.  It’s extremely lax.”

The second reason, he said, is that “every government is essentially monetizing debt through monetary policy.”

“The third reason is that bank deposits are ballooning, and investors don’t really know what to do with that money.”

Blanch says if you put the three together, investors are going to rotate to gold as an alternative to cash.  “And by the way,” he says, “by investors I don’t just mean retail investors.  I think institutional investors are going to make that choice.

The BofA analyst also contrasted this period with the Federal Reserve’s response to the popping of its housing bubble in 2008.  “This time around the Fed has done in 18 days what it took almost nine months to do back in 08-09.  Everything is happening much, much faster.”

Government money printing is a long-term trend, he says, and central banks will have to keep buying all the debt governments issue.  And that will keep a lid on productivity.  “These bloated government budgets will limit our ability to grow at the rates we did in the prior decades.”

“That’s another reason to believe that gold prices will move higher.”

In summary

We think the analysis is mostly sound, although it is likely that prices may begin to surge much faster, especially as gold moves past its prior high of almost $1,900.  Based on our experience in the markets, we anticipate that the public attention gold will get in making a new high, and even more so when the price breaks through $2,000 an ounce, will drive large number of investors, among them many who planned to buy gold “eventually,” to finally act, pushing the price up quickly.

We urge our readers not to wait until then.

After all, the Fed can’t print gold!

60 Years Experience