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Expand chart
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."

Go deeper

Dion Rabouin, author of Markets
Nov 9, 2020 - Economy & Business

Emerging market assets are back in the spotlight

Illustration: Sarah Grillo/Axios

The expected gridlock in Washington and more monetary easing across the globe combined with a less antagonistic approach to countries like Mexico and China from President-elect Biden is getting asset managers excited about emerging markets again.

State of play: Fund managers at JPMorgan Asset Management say EM assets are in a “sweet spot” in the months ahead, especially bonds denominated in local currency.

Former D.C. Guard alleges Army Generals lied about Jan. 6 response

Members of the National Guard and Capitol police keep a small group of pro-Trump demonstrators away from the Capitol following the insurrection on Jan. 6. Photo: Spencer Platt/Getty Images

A former D.C. National Guard official has alleged that top Army generals "lied" to Congress in their testimony on the U.S. Capitol riot, Politico first reported Monday.

The big picture: Col. Earl Matthews, who was serving on Jan. 6, alleges in a memo that the official version on the military response is "worthy of the best Stalinist or North Korea propagandist" and that the Pentagon inspector general's November report on it features "myriad inaccuracies, false or misleading statements, or examples of faulty analysis."

Toyota to build $1.3 billion U.S. battery plant in North Carolina

The all-electric Toyota bZ4X, the company's first battery-electric vehicle, at the Los Angeles Auto Show in Los Angeles, California on Nov. 17. Photo: Frederic J. Brown/AFP via Getty Images

Toyota announced Monday it's investing $1.3 billion to construct an electric vehicle battery "megasite" near Greensboro, North Carolina, set to open in 2025.

Why it matters: Toyota's Prius hybrid won environmental plaudits when it launched in 1997, but it has since lost ground to electric vehicle world leader Tesla, per Axios' Joann Muller. This battery plant will be the first to produce automotive batteries for Toyota in North America.

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