Gold prices have broken through the $3,000 an ounce barrier, driven by a surge in central-bank purchases and investor demand for the precious metal as a safe-haven asset.
Analysts at Bank of America, Citigroup, and Macquarie Group are bullish on gold, citing growing anxiety about the global economy and concerns over inflation expectations. The bank’s head of commodities strategy, Marcus Garvey, raised his top-end price target for gold to $3,500, despite concerns that a frenzied market could lead to a correction.
Key drivers of the gold rally include investors flocking to physically-backed gold exchange-traded funds (ETFs), which saw a major inflow in February. This was partly driven by sentiment from a worldwide rush to ship bullion into the US, where prices are significantly higher than in London.
Concerns over a slowing economy may also prompt US households to diversify their portfolios by buying gold ETFs. Citigroup analyst Max Layton notes that while central-bank buying and high-net-worth individuals have been purchasing gold as a hedge against downside risks, household investors have not yet joined the market.
Analysts caution that bullion may get hit in the short run if there’s a heavy selloff in the stock market. However, they remain bullish on gold’s long-term prospects, with many analysts predicting prices to rise further to $3,500.
Central-bank buying has been a key driver of the gold rally, with 18 tons of net purchases in January. China’s central bank expanded its gold reserves for a fourth month in February, adding to the momentum.
Goldman Sachs now sees a growing likelihood of an even bigger rally driven by strong central-bank buying and rising investor demand. As prices continue to rise, investors are flocking to safe-haven assets like gold, driving up demand and prices.
Source: https://finance.yahoo.com/news/banks-saw-3-000-gold-125347965.html