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Bank of America downgrades 2020 gold forecast, but remains hopeful for a rebound

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(Kitco News) -Hope may spring eternal but reality is starting to bite within the precious metals space as one U.S. bank is revising down its forecast for gold and silver prices.

In a note Friday, analysts at Bank of America Securities said that they see gold prices averaging the year at $1,619 an ounce, down slightly from its previous average forecast of $1,625.

“We have also reduced forecasts for the precious metals after margin calls triggered a round of long liquidations especially in gold,” the analyst said.

The comments come as the gold market fights to push above $1,500 an ounce. April gold futures last traded at $1,496.80 an ounce, up more than 1% on the day.

The bank is a lot more pessimistic on silver, revising down its average forecast to $16.56 an ounce, a 9% haircut from its previous forecast of $18.26 an ounce. Analysts have noted that weak industrial demand will weigh heavily on the silver market.

May silver prices last traded at $12.57 an ounce, up 3.6% on the day.

The bank was also extremely bullish on palladium, expecting prices to push above $3,000 an ounce this year. However the analysts now see an average forecast of $2,800 an ounce, down from the previous estimate of $2,993 an ounce.

Earlier this week, palladium prices briefly fell below the price of gold. June palladium futures last traded at $1,535 an ounce, up 0.35% on the day.

The bank’s platinum forecasts have also been reduced with analysts seeing an average price of $1,030 an ounce in 2020, down from the previous forecast of $1,117 an ounce.

April platinum futures last traded at $616 an ounce, up more than 3% on the day.

The analysts noted that their revised forecast reflects the current situation as the spreading coronavirus continues to weigh on the global economy. The analysts noted that commodities aren’t expected to do well as Bank of America economists expect to see a global recession later this year.

“We see no immediate end to the crisis in sight,” the analysts said. “We await one of two potential positive catalysts: 1) A treatment (not necessarily a vaccine) or 2) A "successful" lockdown (there are early signs). That said, under most outcomes, it may take time for economic activity to normalize.”

Although BoA commodity analysts see lower precious metals prices in the near-term, they are optimistic that a bid will eventually come back into the gold market.

“While there is little light at the end of the tunnel for now, we believe today's extraordinary circumstances will at some stage normalize. Governments around the world are putting together remarkable fiscal and monetary rescue packages to buffer the downside,” the analysts said. “We think gold stands to gain as aggressive easing may increase apprehension over the credibility of central banks, while also reinforcing concerns over the sustainability of the way the global economy is managed.”

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.