Gold prices could hit $3,000 per ounce over the next 12 to 18 months if demand increases among large institutional investors, according to Bank of America commodity strategists. While demand is not high enough right now to justify that price, the precious metal could reach that level on the back of the Federal Reserve cutting interest rates, the strategists told clients in a Monday note. Gold purchases were up 3% in the first quarter of 2024 among institutional investors, which is enough to justify a price of around $2,200 per ounce. If demand increases by about 20%, an average price of $2,500 per ounce could be justified, the strategists said. “We believe gold can hit $3,000/oz over the next 12-18 months, although flows do not justify that price level right now,” the strategists wrote. “Achieving this would require non-commercial demand to pick up from current levels, which in turn needs a Fed rate cut to happen.” Flows into physically backed ETFs and a boost in clearing volumes at the London Bullion Market Association “would be an encouraging first signal,” they said. Central bank demand is also a positive sign, according to Bank of America. Monetary authorities are planning to increase their purchases of gold, according to the World Gold Council’s central bank survey . Nearly 30% of central bank respondents said they intend to increase gold reserves over the next 12 months, “the highest level we have observed since we began this survey in 2018,” according to the World Gold Council survey. Central banks are increasing gold reserves as a hedge against inflation, according to the survey. Monetary authorities are also reducing U.S. Treasury holdings and increasing gold reserves amid worries about the dominance and health of the dollar, according to Bank of America. China, for example, increased its gold holdings to 4.9% of its total reserves in April, up from 3.5% in 2022. Beijing, meanwhile, reduced its U.S. Treasury holdings to a 25-year low of $767 billion in March. @GC.1 YTD mountain Gold year to date Gold futures hit a record high above $2,400 per ounce earlier this year and are up 13% for 2024. In June, however, the precious metal is down 0.2% — on track for its first monthly decline since February.

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