Big Banks Turning Bullish on the Yellow Metal, Gold Prices Could Soar
It can’t be stressed enough: gold prices could be setting up to soar big-time. It could be the next big trade in the making.
You see, after the sell-off in 2013, mainstream financial institutions started to hate gold. The yellow precious metal was called a “pet rock” and a “slam dunk sell” by well known financial institutions.
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Now it looks like their opinions are changing. It’s something I am not surprised about; I have been bullish on gold all along, and I believe it’s selling for a very deep discount.
Just recently, UBS Group AG (NYSE:UBS) came out in favor of gold. It’s one of the major banks in Europe.
It said, “We think overall investor exposure remains low, suggesting there’s ample room for strategic positions to grow as gold’s role as a portfolio diversifier remains valid as broader risks persist.” (Source: “UBS Looks For Gold To Recover To $1,325/Oz Avg. Price In 2018,” Kitco Metals Inc., October 5, 2017.)
In simple words, the bank is saying that it may not be a bad idea to own gold in your portfolio as there are risks present.
The bank expects gold prices to average $1,325-an-ounce in 2018.
Mind you, UBS isn’t the only big investment firm turning bullish on gold prices.
Look at Credit Suisse Group AG (ADR) (NYSE:CS), another major bank in Europe. It expects gold prices to be $1,313 an ounce in the second half of 2017. It’s bullish on gold. (Source: “Credit Suisse Looks For $1,313/Oz Gold In Second Half,” Kitco Metals Inc., July 18, 2017.)
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But, what’s interesting to note is the reasoning behind its bullishness. The bank said, “Our constructive gold thesis continues to be driven by U.S. real rates surprising to the downside, USD [U.S. dollar] strength waning, dovish central bank approach to future monetary policy, continued robust Chinese investment demand, elevated probability of a disruptive geopolitical event, and positioning in gold, which has turned relatively bearish.”
Where Are Gold Prices Headed Next?
What the big banks are saying shouldn’t be anything new to long-term readers of Lombardi Letter. We have been saying the same thing all along…
Dear reader, here’s the thing: the big banks that turned against gold are starting to realize its potential. The yellow precious metal is selling at prices too low to ignore.
It wouldn’t be shocking to see more banks turn bullish on gold prices going forward.
Why is this all worth mentioning? You see, the sell-off in the gold market back in 2013 scared a lot of investors away. Now, as well known banks are turning bullish and saying that gold isn’t a bad investment, it could really give investors’ confidence a boost, and they could be looking to buy gold again.
Moreover, gold prices increasing two years in a row strengthens investor confidence further.
Looking at all this, I can’t help but be bullish on gold prices going forward. In 2018, as big banks are expecting gold prices to be just around $1,350, I expect the yellow precious metal to do much better. I wouldn’t be shocked at all if, by the end of 2018, gold prices are trading at around $1,550 or more. Obviously, with time, we will know more.
As all this is happening, I am keeping a close eye on the mining stocks.
