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Data: FactSet; Chart: Axios Visuals

Gold prices closed at a record high, above $2,000 an ounce, on Tuesday and investors are getting even more bullish.

What happened: Bank of America released the summary of a call between its chief investment strategist and heads of its commodities, rates and technical strategy teams Tuesday that concluded gold was very well supported and could rise as high as $3,000 per ounce in the next 18 months.

The big picture: Globally, central banks and governments have announced $20 trillion of monetary and fiscal stimulus — $8 trillion of monetary and $12 trillion of fiscal, a number that represents around 20% of global GDP, they note.

  • "It's just astonishing and breathtaking and you have to sort of pinch yourself sometimes to sort of realize that it's actually happening," Michael Hartnett, BofA's chief investment strategist, said.
  • Central banks also are likely to continue to buy gold, helping underpin the price going forward, said metals strategist Michael Widmer.

The intrigue: The path for gold is also likely intertwined with the value of the dollar and U.S. real interest rates.

  • For gold to reach $2,500 an ounce Widmer predicts the dollar index would need to fall to near its 2018 low with real rates at -2% (nominal rates minus the rate of inflation).
  • But he could also see a scenario in which the dollar falls to its lowest since 2014 with real rates at -1.5%.

Between the lines: Escalating geopolitical tensions around the globe are also boosting safe-haven appetite for gold.

  • Two large explosions that rocked Beirut, killing dozens and leaving thousands wounded, “probably (added) to the shine of Gold above $2020,” strategists at Mizuho Bank said a note.

The bottom line: "The global pandemic is providing a sustained boost to gold due to increased savings, growing inequality, vast capital destruction, declining productivity, rising public debt levels, and, most importantly, falling equilibrium real interest rates," BofA analysts concluded.

  • "In addition, we believe that a clouded geopolitical chessboard further supports the case for our $3,000/oz forecast over the next 18 months."

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