EDITOR NOTE: Gold is looking to challenge its 2011 highs, breaking above $1,900 an ounce, according to Bank of America. Some banks forecast a $3,000 target; other analysts see a higher price target. Aside from these forecasts, the idea of gold challenging $1,900 doesn’t seem as improbable now as it once did when gold hit its 2015 lows. The coronavirus pandemic has a lot to do with the current demand for safe haven assets. That much is obvious. But the “practical” aspect of holding gold (and silver for that matter) never seems obvious until it's too late. We’ve said this before, countless times, in fact. Well, would it be inappropriate to say, “we told you so”?
Gold's rally over recent weeks sets it up to post record-highs before the year is out, Bank of America said in a Tuesday note.
The precious metal is up 17% year-to-date, thriving on investors betting the coronavirus will drive a prolonged recession. Gold's trading range now sets a breakout level at $1,900, the firm said. Should traders continue to flock to the popular safe haven, it stands to keep gaining through the end of the year.
"The breakout occurring now that is ending Q2 completes an eight week trading range that has resumed higher," Paul Ciana, technical strategist at Bank of America, wrote. "These patterns say gold can make a new all-time high in [the second half of 2020] with Q3 on our mind."
Gold reached its highest point since early 2012 on Wednesday as rising COVID case counts fueled fresh recession fears. Though the metal slumped through March as the coronavirus pandemic prompted indiscriminate selling, it was one of the first assets to retrace its year-to-date losses. April's sharp rally slowed and set the stage for Bank of America's projected run-up.
The consolidated trading range seen throughout May and June gave gold "time to cool off" and allowed net non-commercial positioning to fall from record highs, Bank of America said.
Gold currently trades at roughly $1,770 per ounce, and the $1,800 threshold serves as its next major challenge. When prices peaked in 2011, that level was challenged three times to no avail. Passing $1,800 "would be meaningful," Ciana said.
A major safe-haven pivot might not be enough to prompt such a rally, the analyst added. Gold is investors' third most popular risk-off asset, falling behind 10-year Treasury notes and put options against the S&P 500. A separate Bank of America survey deemed gold the fourth most-crowded trade behind Treasurys, cash, and tech stocks. While sentiment shifts risk ending the precious metal's upswing, Ciana expects trade tensions, near-zero interest rates, and reopening risks to boost gold's appeal.
Gold traded at $1,773.46 per ounce as of 11:15 a.m. ET Wednesday.
Originally posted on Business Insider