The Bank of America has updated its 12 month gold forecast after the better-than-expected success rates of the three coronavirus vaccines shifted the gold market landscape. In the Bank of America’s recent 2021 outlook presentation, strategists downgraded their gold price target from $3,000 per ounce to $2,063 per ounce, citing a sudden turn of global events behind the shift into neutral territory.
Gold has recently been facing a rising number of challenges as the global economy continues to recover and positive news of several effective vaccines increases optimism with investors. Previously, markets had anticipated that coronavirus vaccines were only going to be around 60% effective, rather than the 90% effectiveness rate that several of the major vaccine companies are currently seeing. This means that life could soon be back to normal a lot sooner than formerly expected.
Although the ongoing monetary and fiscal stimulus measures being pushed by governments in several key economies will likely push gold prices above $2,000 per ounce once again, the BofA strategists foresee long-term interest rates increasing as well. Michael Widmer, one of the strategists behind the BofA’s 2021 outlook, notes that the anticipated rise in inflation could ultimately lead to higher nominal interest rates. However, the unknown is whether or not inflation will rise faster than nominal interest rates in order to keep real interest rates subdued.
The BofA 2021 outlook also touched base on silver, which the strategists predict will eventually end up outperforming gold. Although the bank lowered its forecast for silver to $29.13 per ounce in 2021, the global economic recovery will cause the industrial demand for the metal to rise. The strategists noted that the outlook for silver remains optimistic as a post-pandemic recovery will likely focus on green energy initiatives and push the need for solar panels – for which silver is a key input – higher.
Information for this briefing was found via BofA. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.