BofA Merrill Lynch: Gold “could rise to $1,500/oz by 2017”

“The Wall Street Bull” by herval via Flickr, used under a Creative Commons license

Bank of America Merrill Lynch (BofAML) analysts believe the worst may be over for gold. According to a recent report, they see gold reaching $1,500/oz. by 2017.

At the same time, a global BofAML survey revealed concerns of overvaluation in the equity and bond markets. A press release on the survey reads: “Bonds Seen as Most Overvalued in Survey’s History”.

“The worst may be over for gold”

The issue of the Federal Reserve raising interest rates has been pressuring gold, but BofAML analysts believe gold will prevail:

“We believe the upcoming Fed rate hike is the only major obstacle to sustained price rises.”

They do expect the Fed to raise interest rates, but not sharply, and think gold may have already seen the worst of it:

“While a normalization in rates is likely, aggressive rate hikes are not our base case, which is a reason we believe the worst may be over for gold after the dreadful price collapse in 2013 and muted price movements in 2014.” [emphasis added]

Fed Chair Janet Yellen did state in late March that interest rate hikes will be gradual. Yellen is not yet satisfied with the economy’s recovery from the 2008 financial crisis and the weakness in the labor market. She also fears acting too soon or too late.

The BofAML analysts also see weakness in the economy and believe interest rate hikes will be delayed and moderate, which could help gold break out of its $1,100-$1,300 range:

“We believe the metal could rise to $1,500/oz by 2017.”

“Bonds Seen as Most Overvalued in Survey’s History”

According to the BofA Merrill Lynch Fund Manager Survey for April, “Investors see growing overvaluations in both bonds and equities and have signaled concern about a valuation bubble forming.”

A few of the survey’s findings*:

• 25% of respondents said global equities are currently overvalued – up from 23% in March and 8% in February, and the highest proportion since 2000.
• 84% of respondents said bond markets are overvalued, up from 75% in March and the highest proportion in the survey’s history.
• A net 68% believe the United States is the most overvalued region.
• 18% said currencies is the asset class most vulnerable to volatility, a rise of 5 percentage points.
• 13% said the U.S. dollar is overvalued against the euro and the yen, sharply up from February’s 12% saying the dollar is undervalued.

* All percentages are net percentages.

Concern over a correction or crash in the stock market seems to keep growing. Let physical gold be your hedge against uncertainty. Call American Bullion today at 1-800-326-9598 to find out how easy it is to own gold and silver. Remember to request your Free Gold Guide.

SOURCES: Kitco News, Bank of America Newsroom

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Although the information in this commentary has been obtained from sources believed to be reliable, American Bullion does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice. American Bullion will not be liable for any errors or omissions in this information nor for the availability of this information. All content provided on this blog is for informational purposes only and should not be used to make buy or sell decisions for any type of precious metals.