Bank of America predicts gold reaching $3,000 and raises concerns about a copper supply crisis, stating that metals have their own rhythm.
Bank of America predicts that gold prices will surge to $3,000 per ounce by 2025, bolstered by robust demand from central banks and the anticipation of investors re-entering the market once the Federal Reserve starts cutting interest rates.
Michael Widmer, the bank's commodity strategist, emphasized gold's resilience amidst tightening monetary policies worldwide. He highlighted the significant role of the Chinese central bank in supporting the gold market, having acquired over 200 tonnes of gold in 2023 alone. This substantial buying activity is linked to the surge in China's retail sector, with record-high jewelry sales and non-monetary gold imports earlier this year.
Widmer suggested that if the Fed indeed begins to lower rates, investors would likely re-engage in the market, counterbalancing potential declines in Chinese investment demand as sentiment improves and the economy picks up pace. Consequently, Bank of America revised its price estimate for gold from $2,400/oz to $3,000/oz by 2025.
In response to these forecasts, Bank of America's equity research team upgraded its rating on Alamos Gold Corp. (NYSE: AGI) from Neutral to Buy.
Additionally, Bank of America warns of a looming copper supply crisis. According to Widmer, raw material markets, particularly copper, are experiencing unique dynamics due to their crucial role in the energy transition. The bank anticipates significant price increases driven by green technology investments, low inventories, and global economic recovery.
Copper prices are forecasted to average $10,750 per tonne in 2025, rising to $12,000 per tonne in 2026. Widmer highlighted the tightening copper mine supply, which is increasingly affecting refined production, emphasizing the shortage of new mine projects.
Despite advancements in electric vehicle technology reducing copper requirements, demand from other sectors remains high, particularly in data center cabling and electricity networks.
In light of these optimistic projections, Bank of America upgraded its ratings for copper producers Freeport–McMoran Inc. (NYSE: FCX) and Hudbay Minerals Inc. (NYSE: HBM) from Neutral to Buy, signaling anticipated strong performance in the copper sector.