Bank Report (Another) Says $2500 Gold in Cards – Analysis

1. Market Rundown
2. “Gold Rallies as Fed Stops Hiking”
3. Zen Moment: Dog Agility

Good Morning. The Dx is down 69. Stocks are up between 40 and 85 bps. Bonds are weaker across the board. Gold is up $10 at $2006. Silver Fu are up 39c. Copper is down 20bps. oil is up 30c. NG is flat to lower slightly. Corn, Soy, and Wheat are down 50, 65, and 150 bps respectively. Crypto is firmer tracking but overperforming stocks

Bitcoin slammed and recovered last night, ping-ponging between $27,000 and $30,000…

A second major bank, BOA, has made it clear that if public investment demand picks up, Gold should not have a problem reaching $2500. The first was Goldman Sachs which published a report the first week of March.

Here is BOA’s operative quote: 

Bottom line: non-commercial purchases do not need to increase materially to justify gold hitting $2,500/oz this year; inflows into ETFs will be critical and dynamics in assets under management will be a crucial indicator confirming whether price gains can be sustained

Over the last few months we noticed the increase in Bank attention to Gold here. In particular was the interest by BOA. First by Hartnett, then by their equity analysts who were considering Gold as a “green” metal and thoughts that vertical/lateral industry consolidation could happen since Gold and Copper mines are geologically related Today, those  Bank analytical trends hit full stride.

There is a lot in this comprehensive report: The bank notes that Central banks are weaponizing the USD. Meanwhile the Fed may stop hiking with inflation expectations simultaneously picking up. Jewelry and investment demand are analyzed. The key missing point, they note, is mainstream investment demand. And that only has to pick up a little according to their model:

Our gold supply and demand model shows that investor purchases need to increase only slightly for prices to push higher: assuming that central banks keep boosting their gold holdings, increases in assets under management at physically backed ETFs should extend the rally.

Remember that it was Hartnett who recently said to sell stocks when the Fed does their last hike. It was also Hartnett who said inflation is here to stay weeks ago. It is all in here. Flows, FX correlations, rates, Macro etc. Their headline below continues that theme.

While it is never safe to say Gold and Silver are going straight up. It is safe to say that Gold is now an  asset to recommend, and big banks are obliging them in full rampup mode. The analytical bandwagon is starting.This is, in no small part because grass roots demand post the Fed’s inflation fumble and the SVB  bank default debacle is real. People demand  hedges for these two risks (inflation and bank solvency) now.

Things are moving fast on the banking side; to what ends we do not know. But they are speeding up and keeping pace with investor awareness. The virtuous feedback loop— must read to see the Gold forest for the trees— is starting.

MSM PRO Coverage of the same report…

UPDATE 4/27:

1-The word “perfect” does not appear in the report in question.  
2- We now believe based on history and extensive experience, but have no hard evidence yet, that new precious metals investment products will be coming online with which to attract the newly burgeoning Gold investment demand. Most recently we saw this in Bitcoin via the BITO ETF ramp up and launch.  We would  therefore not be surprised if some big banks or China created Gold vehicles that could capture some flows if current trends continue. Continue reading here