Bank of America Corp.’s (NYSE: BAC) report is called “The Thundering Word: The Gold Flush” and it shows what BofA expects now that gold is down $300 and oil is down more than $20 in the past eight weeks. Its commodity strategists see risks that gold could fall yet another $150 per ounce. BofA also has removed its $2,000 gold price target for 2014, and the firm went even further by reducing its core asset allocation in precious metals from bullish to neutral. Today’s downgrade called gold an idiosyncratic commodity. Yep, another gold bull has run the streets and been slaughtered. On oil, BofA shows that the risk for Brent crude is down to less than $95 near term.
A couple of takeaways can be noted as well. BofA indicated that secular turning points in gold prices have coincided with secular turning points for the economy and asset markets. It said, “After the plunge ends, equities tend to rally. Lower oil will be a positive automatic stabilizer for markets. We expect volatility to rise in the second quarter, and a buying opportunity to be created.”
Be advised that gold is trying to show strength again with a gain of more than $20 on Thursday morning. That is still less than $1,390 per ounce, and so far most pops we have seen in the morning on gold have only led to more selling each day. NYMEX WTI crude is also up 0.6% at about $87.50 per barrel, while Brent crude shows last day prices at $98.40.
We would point out three very recent issues in gold. First off, Wall St. analysts are starting to defend the battered gold miners despite the pounding of 40% in some cases so far in 2013 alone. Another issue is that six very surprising nations have their central banks buying up the excess gold. On a last and perhaps confusing issue, PIMCO’s Bill Gross sounded like he was saying “sell gold.” but his public relations acted as a cleanup crew stating that it was not what he meant and that Mr. Gross would actually be a buyer of gold here.
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