Bank of America (BofA) was one of the banks that was bullish on gold as we entered 2024. Everything they have seen this year has further strengthened the Bank’s faith.
Gold will hit $2,400 this year!
Commodity analysts led by Michael Widmer issued a note on Tuesday. On that note, he reiterated his predictions that gold will rise to $2,400 this year. In December, Widmer said he expected a yellow metal rally once the Federal Reserve began lowering interest rates. This stance has changed only slightly. Widmer said in the report, “We had previously suggested a price estimate of $2,400 if the Fed lowered interest rates in the first quarter of 2024. “We are sticking to this forecast for this year, even if rate cuts come later,” he says.
cryptokoin.comAs you follow from , gold made significant gains last month. During this period, the yellow metal broke record after record. With that came BofA’s bullish outlook. Gold rose even as the US dollar and bond yields traded at higher levels.
Demand for gold came from other investment instruments!
Gold’s rise has not only challenged long-standing relationships in the market, but prices have also surged as Western investors have largely ignored the precious metal. Widmer points out that Western investors are liquidating their positions in gold-backed exchange-traded products. Because, despite this, he states that the demand for gold comes from other investment instruments. In this context, the analyst makes the following statement:
Positioning in the options space has been very strong. Indeed, risk reversals (call-puts) are on a sharp rise. This increase has been particularly pronounced in low-delta options, highlighting that investors are seeking optional exposure to the yellow metal rather than a direct linear investment. In both cases, these option purchases were reflected in the spot market and increased prices.
Physical demand will continue to support prices in 2024
Michael Widmer also states that physical demand, driven by Chinese and Indian investors and central banks, will continue to support gold until 2024. Widmer says the People’s Bank of China is a leader among central banks. He also notes that this also affects individual Chinese investors. Additionally, he talks about the following:
Jewelry sales and non-monetary gold imports reached record levels earlier this year. This interest to some extent reflects the lack of alternative options for Chinese investors, with stock markets and housing still not particularly attractive.
When the Fed begins its new easing cycle, the West will also step in!
Besides China, Bank of America says that healthy physical demand in India and stable price premiums in regional markets such as Turkey (Istanbul) and Switzerland (Zurich) paint a strong global gold market picture. Meanwhile, BofA is not completely ignoring Western investors. Widmer says this leg of the gold market is expected to return when the Fed begins its new easing cycle. In this context, the analyst makes the following comment:
If the Fed eventually starts lowering interest rates, investors will return to the market. It would also offset potentially lower Chinese investment demand as sentiment in the Asian country improves and the economy accelerates.
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