“Central bank balance sheets are going to double. Fiscal deficits are going to double. And, we are going to find ourselves with a lot of debt, being effectively socialized.”
– Francisco Blanch, Bank of America’s head of commodities and derivatives research
Way back in April, Bank of America Corp. raised its 18-month gold-price target to $3,000 an ounce. With gold stable above $1,800 per ounce, investors are wondering what the next catalyst might be. As debt continues to pile up and the average debt-to-GDP ratio for countries all around the world continues to increase rapidly, a gold allocation is becoming more obvious.
Francisco Blanch, the bank’s head of commodities and derivatives research, believes that gold is still a core part of the monetary base.
On gold, he comments,
“Gold is the ultimate safe asset. It is the only part of the central banks’ balance sheet that is nobody else’s liability.”
“Everything else they hold is somebody else’s liability.”
Blanch Points to Negative Real Interest Rates
And after being questioned about the stunning call from such a large institution, Blanch points to negative real interest rates, stating,
“Real interest rates are just going to be in negative territory for many, many years to come and that is what is going to drive the gold price a lot higher.”
“If you have your money in a bank deposit or cash, you will lose money over the next five years.”
When asked, how will gold perform in a deflationary environment?
“The Fed has never really been this fast before. Within 18 days, they did more work on their balance sheet and on trying to support both asset values and consumer prices than they did in 6 months in the financial crisis of 2008.”
Finally, he adds that,
“They had all the tools ready, and they just pulled the trigger.”
Gold is still above $1,800 per ounce despite a small decline to end the week. Tallying its 5th straight weekly gain, the precious metal is enjoying a bull market that may be just warming up. As financial leaders like Francisco Blanch with massive audiences continue to forecast higher gold prices more mainstream investors will awaken to gold.