Gold set to soar above $1,300/ounce, says BoA

Gold is set to surge over the next year as concerns deepen about the widening US budget deficit and a tariff driven trade war starts to damage the country’s economy, according to Bank of America Merrill Lynch.

Bullion could average $1,350 an ounce in 2019 as corporate tax reforms worsen the US fiscal balance, Francisco Blanch, head of global commodities and derivatives research, said in a phone interview last week. Spot gold traded at $1,198.82 on Monday and has averaged about $1,285 this year.

“We are still pretty constructive longer term on gold,” because of worries over the future of the US economy even though it’s performing relatively well right now, said Blanch. “In the short run, the effects of strong dollar, higher rates dominate. But in the long run, a huge US government budget deficit is positive for gold,” he said. The warning over the budget echoes billionaire hedge fund manager Ray Dalio, who predicted this month that the US economy is about two years from a downturn, which will see the dollar plunge as the government prints money to fund a swelling deficit. Goldman Sachs has also joined the chorus of bulls, seeing gold at $1,325 in 12 months.