By Senad Karaahmertovic
A Bank of America analyst has reflected on the underperformance of gold stocks with the yellow metal down over 5% YTD despite the conflict in Ukraine.
The analyst believes gold stocks are not performing better because the Fed’s “atypical behavior” is pushing real rates higher. However, he believes better times are ahead for stocks like Barrick Gold (NYSE:GOLD) and Newmont (NYSE:NEM).
“The BofA Commodities team sees a limit to this rise in real rates and sees a likely peak (and Fed pivot) as a key catalyst to push gold prices higher,” he said in a client note.
Gold prices are down a further 1% today to trade near the $1,730 per ounce handle. This is about $200 lower than the current BofA commodities team projection of $1,938/oz in 2022E and $2,049/oz in 2023E.
“If stagflation fears turn to reality, these forecasts may prove conservative, in our view,” the analyst added.