Gold may be seeing low prices right now, but Bank of America analysts are predicting soaring prices over the next three years. According to analysts, there are several scenarios that could push prices higher. One scenario is an increase in metal purchases. Even if investors bought only a third of the gold they purchased in 2012, prices could trade as high at $2,000 an ounce.
By Dan Weil
Wednesday, 29 May 2013 11:20 AM
Gold may be down in the dumps now, but it's going to soar over the next three years, according to Bank of America analysts.
Spot gold was trading at $1,386 early Wednesday, down 15 percent so far this year.
"In our view, the gold bull market is pausing. However, we believe the structural rally is not broken, and we see several scenarios that could push prices higher again," the analysts, led by metals strategist Michael Widmer, said in a report obtained by CNBC.
"To pick just one, more affluent emerging markets could increase metal purchases to such an extent that gold could trade at $2,000 per ounce by 2016, even if investors bought only a third of the gold they purchased in 2012."
BofA trimmed its average 2013 gold price forecast by 12 percent to $1,478 per ounce. But that's still a 7 percent increase from current levels.
When it comes to silver, BofA analysts believe the metal's price will average $24.35 an ounce this year, up 9 percent from $22.33 early Wednesday, but 25.5 percent lower than their previous forecast of $32.70.
"We believe the fundamental backdrop for silver has weakened," the analysts said.
However, Widmer noted that silver might fall below $20 an ounce this year, but a "complete meltdown" in prices will be prevented due to demand for precious metals.
"The visible underperformance of silver prices was, in our view, heavily influenced by a lack of industrial demand," Widmer said.
"This is perhaps best reflected in silver imports from the U.S. and Japan generally hovering well below the longer-term average in the past 18 months. The picture has been similar in China year-to-date. While the country has remained a net importer, shipments have generally not broken out of the longer-term ranges."
When it comes to gold, others see signs of support too. "Every time when gold prices drop, we start to see a sharp pick-up in physical demand," Phillip Streible, senior commodities broker at R.J. O'Brien, told Reuters.
"Dealers are buying for fear of a sharp correction higher."
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