Investing.com -- Bank of America (NYSE:BAC) strategists on Tuesday reiterated their view that gold prices could hit $3,000 next year.
Since late 2023, the BofA commodities team has maintained a bullish stance on gold, projecting that the price could reach $3,000 per ounce by 2025. With gold prices already up 21% year to date, the precious metal appears to be on track to meet this target.
"We believe gold can hit $3,000/oz over the next 12-18 months, although flows do not justify that price level right now," analysts wrote.
“The team thinks that the $3,000/oz target would require non-commercial demand to pick up from current levels, which in turn would require US interest rate cuts,” they added.
A rise in inflows to physically backed exchange-traded funds (ETFs) and an increase in London Bullion Market Association (LBMA) clearing volumes would be early indicators of this shift. Moreover, ongoing central bank purchases are crucial, as efforts to reduce the share of the US dollar in foreign exchange reserves may drive further buying.
BofA’s rates strategists have also highlighted potential instability in the U.S. Treasury market, suggesting it is one shock away from significant disruption. In such a scenario, gold might initially drop due to broad liquidations but is expected to rebound, as has been observed in similar past events.
Gold prices remained steady on Tuesday, with market focus shifting to upcoming U.S. jobs data, which could offer insights into the extent of the Federal Reserve’s expected rate cuts this month.
Spot gold was priced at $2,498.87 per ounce by 1111 GMT, after hitting a more than one-week low in the previous session due to a stronger dollar. U.S. gold futures edged up 0.1% to $2,530.70.
According to analysts at Quantitative Commodity Research, the gold market is currently torn between assessing the depth of the Fed's potential rate cuts in September and anticipating further cuts in subsequent meetings.
Traders currently see a 31% probability of a 50 basis point rate cut at the Fed's Sept. 17-18 meeting, with a 69% chance of a quarter-point cut.
Investors will also closely watch Friday's U.S. payrolls report, along with ISM surveys, JOLTS job openings, and the ADP (NASDAQ:ADP) employment report for further clues on the Fed’s rate cut strategy.