BofA highlights four key policy dimensions of the incoming US administration that could suppress gold demand in the near term by driving higher rates and a stronger USD. However, these bearish factors do not derail BofA’s longer-term bullish outlook for gold, with a price target of $3,000/oz by end of 2025.

Key Points:

• Near-Term Bearish Policy Drivers:

  1. Deregulation: Growth-boosting deregulation in energy and financial services could elevate interest rates, reducing gold’s appeal.
  2. Fiscal Policy: Extended and expanded tax cuts may bolster short-term economic growth and raise rates further, adding to gold’s challenges.
  3. Tariffs: Higher tariffs on China and other countries could strain emerging market currencies, curbing central bank appetite for gold purchases.
  4. Fed Policy: The Fed may pause its easing cycle if strong growth and tariffs push inflation higher, reducing gold’s safe-haven allure.

• Impact on Gold Demand:

  • Near-term investor appetite for gold may wane due to these policies.
  • EM central banks may scale back gold purchases amid currency pressures stemming from tariff risks.

• Long-Term Outlook Remains Positive:

  • Structural demand from central banks and strategic investors supports a long-term bullish case.
  • Gold’s appeal as a hedge against geopolitical risks, economic uncertainties, and potential inflationary pressures persists.

Conclusion:

While near-term policies under the incoming US administration present significant headwinds for gold through stronger growth, higher inflation, and a robust USD, BofA maintains its $3,000/oz target for end of 2025. This longer-term optimism reflects enduring structural and cyclical factors that support gold demand, even amidst challenging policy environments.

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This article was written by Adam Button at www.forexlive.com.