The dominance of the dollar in the global economy is falling and Bank of America analysts affirm that this can bring in not only institutional investors, but also private investors.
For the BoFA the current gold prices are not correct.
He gold continues to beat maximums and according to analysts Bank of America, you still have a long way to go. The metal could reach US$3,000 per ounce in the next 12 to 18 months.
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“We believe gold could reach $3,000 an ounce in the next 12 to 18 months, although flows do not justify that price level at this time. Achieving this would require non-commercial demand to rebound from current levels, which would in turn requires that a rate cut by the Federal Reserve“, they explain in the investment bank.
“The ongoing purchases by central banks are also important, and a boost to reduce the participation of the dollar in currency portfolios will probably lead to more gold purchases by central banks,” they add at Bank of America.
Central banks bet on gold
According to these managers, “it is encouraging that the latest survey by the Central Bank of the World Gold Council confirms that monetary authorities are seeking increase your gold purchases. Long-term store of value and inflation hedging, performance in times of crisis, effective portfolio diversification and “The absence of default risk makes gold attractive.”
“While central banks’ motivations for owning gold may vary, they tend to have one thing in common: the proportion of dollars in their portfolios has been decreasing. In fact, Chinese holdings of US Treasuries (UST) have fallen by $102 billion over the past 12 months, while gold holdings have increased by 8 million ounces, equivalent to $51 billion, since January. “explain these experts.
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The proportion of the dollar held by central banks was decreasing
“Central banks have had a variety of reasons for reducing their dollar holdings in foreign exchange portfolios, including la realignment of currency denominations in reserves with the currencies with which countries really trade and the move towards a multipolar world”, highlight the BofA analysts.
“More recently, there has been some concern about the dominance of the dollar in the global economy and the health of the US currency. This should drive more gold purchases by central banks and could also attract the interest of private investors,” these experts conclude.
