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Fourth quarter could be as good as it gets for gold; prices to peak at $1,900 - Bank of America

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(Kitco News) - The goldmarket has lost its sparkle as investors continue to focus on when the Federal Reserve will start to tighten its monetary policy by reducing its bond-purchasing program, according to commodity analysts at Bank of America.

In its latest forecast published Thursday, Bank of America expects gold prices could push to $1,900 an ounce at the end of the year. However, it expects the average price to come in around $1,800 an ounce in the final three months of the year. The fourth quarter could be the highwater mark for the precious metal as the bank sees prices gold steady at around $1,800 an ounce through the first half of next year.

The analysts said that bullish momentum in the U.S. dollar and rising bond yields present challenges for the gold market.

"The global macro backdrop remains uninspiring and continues to discourage investor inflows into gold," the analysts said. "Breakevens and nominal rates have not shown a persistent trend higher or lower in recent months and have therefore been too choppy for the gold market. To that point, real rates, usually the key driver of gold, have been on a round-trip this year, and are now trading back at the levels seen in January."

For Bank of America, the one bright spot for gold remains persistent inflation; however, tightening monetary policy from the Federal Reserve could limit any gains into the new year.

"As the U.S. economy accelerates, inflation should pick up; with markets continuing to factor in a benign inflation outlook, any overshoot or re-pricing here could ultimately support the yellow metal. That said, the immediate focus will likely remain on tapering, so gold looks to remain unattractive to investors for now," the analysts said. "A persistent move higher in real rates is the biggest risk to our cautious gold."

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.