The May edition of Bank of America’s Global Fund Manager Survey indicated that 45% of investors now view investment assets as “overvalued.” This marks a notable increase from the 34% noted in April, coinciding with a rise in gold prices to record levels.
This growing skepticism among investors mirrors the perspective of BOFA experts, including Francisco Blanch, who heads global commodities at the bank.
“The gold narrative is quite straightforward. Based on the Global Fund Manager’s survey, gold is currently the most heavily positioned asset across the board,” Blanch expressed during a Bloomberg TV interview. “Right now, most people are betting long… that’s the trade.”
Blanch suggested that investors might have already seen a peak in gold prices, at least for the near future.
Precious metals have been among the top-performing assets this year, with gains surpassing 22% amid high demand for gold-related products and significant central bank purchasing. Notably, gold recently exceeded the $3,500 mark for the first time in history.
However, he also noted that for gold to stay above $3,500 per ounce, there needs to be consistent investment and demand from central banks. Current demand is growing at approximately 5% year-on-year, but he believes it should ideally be around 10% for prices to keep climbing.
“It’s important to remember that jewelry demand has dropped by about 20% since the start of the year. The gold market is facing issues, as prices have become quite unstable during this period of preparation, and typically when prices go up, they signal a change in trend,” he added.
Additional Catalysts Required
BOFA strategists have mentioned that the downward trend in gold prices could continue in the short term unless prompted by another significant event.
“I’m not overly pessimistic in the long run. We still hold a positive outlook on gold long term, but we’ve set a lower price target of $3,500. For the moment, it appears we might be nearing a peak, and additional pressure from the U.S. may be necessary,” Branch pointed out.
“Recently, trading conditions in China have eased, which is a relief for the market. For a while, we’ve been experiencing downward pressure on gold,” he said.
The bank previously predicted gold prices would reach $3,500 within two years, a target that now seems to be reached ahead of schedule. Their latest forecasts for 2025 and 2026 are $3,063 and $3,350 per ounce, respectively.
When discussing what might push gold back to the $3,500 level, Blanch mentioned, “Keep in mind that trade negotiations are regaining momentum—we have 90 days for potential agreements. I hope the global trading system won’t collapse; perhaps we could glimpse an economic upswing from upcoming transactions.”
“Another significant unknown is the geopolitical situation involving Russia and Ukraine. This could go either way. For instance, the U.S. might impose further sanctions on Russia or introduce another layer of pressure.”
“That’s what I’m alluding to. We haven’t seen that yet, but it could be a factor in increasing investment.”
