Big Banks Turn Bullish on Gold Prices
Gold prices could be setting up to surge big-time. Investors should be closely watching the yellow precious metal, as there are a few developments that could provide a rosy outlook for gold prices in 2016 and beyond.
You see, in 2013, one of the biggest reasons gold prices tumbled—and investors panicked—was the big investment houses turning pessimistic toward the yellow metal. They thought interest rates would go up and central banks would implement tighter monetary policies.
For instance, Goldman Sachs Group Inc (NYSE:GS) called gold a “slam dunk” sell and forecasted that the gold price would hit around $1,000 an ounce.
After the call from Goldman Sachs, several other investment houses came out with similar calls regarding gold prices. We even saw calls for gold prices dropping to around $800.00.
Here’s what you have to know: investors usually pay attention to these calls and act on them.
When Goldman Sachs and others financial institutions were saying gold will drop, investors ran for the door. Now, about three years later, we are seeing the complete opposite.
Those banks that were bearish on gold prices then are now turning bullish. With this, you have to ask one question: are investors going to follow their calls as well and run to buy gold?
Not too long ago in May, Goldman Sachs raised its forecast for gold prices and its rhetoric toward the precious metal changed significantly.
Bank of America Corp (NYSE:BAC) said, “We reinforce our bullish view particularly on gold and silver, which should continue to perform well given subdued global growth and risks that this will skew the public debate towards wealth generation/distribution, populism and migration, with all the negative consequences this may have on effective economic policy making.” (Source: “Gold Going To $1,500, Silver To $30, Says BoAML,” Kitco News, July 8, 2016.) The investment house said gold prices could shoot up to $1,500 an ounce.
HSBC Holdings plc (ADR) (NYSE:HSBC) also upped its gold price forecast. It expects the precious metal to hit $1,400 an ounce.
HSBC said, “We continue to expect some of these factors, notably continued accommodative Fed policies and investor demand, to support gold and add another reason for strength in the months ahead: increased demand for perceived ‘safe-haven’ assets following the U.K.’s vote to leave the EU (European Union).” (Source: “HSBC Ups Gold Forecast But Sees Potential Ceiling At $1,400/Oz,” Kitco News, July 5, 2016.)
Gold Prices Outlook for 2016
Dear reader, the list of banks turning bullish toward gold prices is getting longer by the day. We have heard positive calls from Morgan Stanley (NYSE:MS), UBS Group AG (USA) (NYSE:UBS), and Commerzbank as well.
When something like this is happening, you have to follow the gold market very closely. I truly believe this could have positive consequences for gold prices for the rest of 2016 and beyond.
With all this said, I keep my stance and believe gold mining shares are where investors will find the biggest rewards. If we assume gold prices will jump just 20%–30% from where they currently trade (I believe $2,000 gold prices is very possible in the next few years), there are several gold mining companies that could see explosive gains.