The Fed Can’t Print Gold

Wall Street gold forecasts have been rising with the price of bullion. But now, Bank of America is boldly predicting gold will soar more than $1,000 an ounce above its all-time record high. The bank’s new target is $3,000 an ounce within 18 months, a 50 percent increase from its prior forecast. 

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“The Fed Can’t Print Gold,” is the title of Bank of America’s precious metals report, which points to the fact that the central bank is aggressively spending more than $2 trillion dollars to support the economy and the financial markets through purchases of mortgage-backed securities, municipal bonds, corporate bonds, and loans to businesses. But while the central bank is flooding the economy with dollars printed by the U.S. Treasury, there is no way to suddenly flood the market with gold.

“As central banks rush to expand their balance sheets and backstop the economy, a lot of risks could effectively be socialized, boosting the appeal of gold,” the analysts said. 

Bank of America, like virtually every other investment firm, is anticipating a severe recession in the United States. “As economic output contracts sharply, fiscal outlays surge, and central bank balance sheets double, fiat currencies could come under pressure,” Bank of America analysts Michael Widmer and Francisco Blanch said in the report. “Investors will aim for gold.”

The analysts predict the price of an ounce of gold will average $1,695 this year, and $2,063 in 2021, implying substantial volatility is built into the forecast of $3,000 an ounce. Gold hit an intraday record of $1,921 in September of 2011. 

The report also warns that the stock market bounce back from late March through mid-April may be overdone and could make the market vulnerable to another tumble that would increase the attractiveness of gold.

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