gold, BofA Expects Gold Prices to Rise Due to Coronavirus Impact
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BofA Expects Gold Prices to Rise Due to Coronavirus Impact

Bank of America Global Research raised its forecast for the average gold price. It expressed optimism for the prospects of the yellow metal. Central banks have the limited ability to raise interest rates in the face of the slowdown in global growth. The coronavirus and commercial war play a big role in this struggle.

The Coronavirus emerged in China in December and has spread worldwide, with more than 93,000 cases and about 3,000 deaths.

The health emergency brought the copper-gold ratio to the levels last seen during the great financial crisis. This highlights a preference for quality over risk, the bank said.gold, BofA Expects Gold Prices to Rise Due to Coronavirus Impact

In a note dated March 3, BofA raised its average estimates for the price of gold from $ 1,494 to $ 1,625 per ounce in 2020. Additionally, it rose from $1,550 to $1,650 in 2021. However, it reduced its forecasts for the cost of copper during this year from 6,200 to 6,053 dollars per ton.

The rapidly expanding epidemic has affected global economic activity and forced China to ensure liquidity. In a surprise decision, the US Federal Reserve cut interest rates on Tuesday to mitigate the impact of the Coronavirus.

The bank also reduced its forecast for global growth in 2020 to 2.8%, considering a mini-recession, although it expects an economic recovery.

The bank believes that global activity should recover. When Covid-19 cases finally reach their peak in China and the Western world, logistical regulations, fiscal and monetary stimulus come into action.

These two dynamics – a normalization around Covid-19 and stimuli – could have a powerful impact on global activity, especially if supply chain disorders begin to regularize.

Gold Closes Stable

Gold prices closed almost unchanged on Wednesday. This occurred after the comeback of the previous session motivated by the surprising cut in interest rates of the Federal Reserve of the United States.

Cash gold traded stable at $ 1,639.43 an ounce. Moreover, gold futures in the United States gave 0.1% to $ 1,643 an ounce.

Michael Matousek, an operator of US Global Investors, said that a lot of people are focused on US stocks at this time. Gold is also digesting part of the variations it had after the Fed’s rate cut.

Gold registered its best performance on Tuesday since June 2016, rising to 3.7%, after the US central bank reduced interest rates by 50 basis points in an emergency measure to protect the world’s largest economy of the impact of the Coronavirus.

 

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