Bank Of America Sees Gold At $3,000, Warns Of A Copper Supply Crisis: Metals ‘Dance To Their Own Tune’

Gold prices are projected to jump to $3,000 per ounce by 2025, according to Bank of America, buoyed by strong demand from central banks and the anticipation of investors returning to the market once the Federal Reserve begins to slash interest rates.

Michael Widmer, the bank’s commodity strategist, highlighted gold’s resilience as central banks tighten monetary policies.

“Gold prices have been remarkably resilient in recent months, notwithstanding central banks around the world tightening monetary policy,” said Widmer.

The Chinese central bank, in particular, has played a significant role in supporting the gold market, amassing over $200 tonnes of the yellow metal in 2023 alone. This elevated buying also depends on the heightened activity in China’s retail sector, with jewelry sales and non-monetary gold imports “hitting record highs earlier this year.”

“If the Fed ultimately starts cutting rates, investors should return to the market, also offsetting potentially lower Chinese investment demand as sentiment there improves and the economy accelerates. We had previously proposed a US$2,400/oz price estimate if the Fed cut rates in 1Q24; we now raise that and see gold rallying to US$3,000/oz by 2025,” Widmer affirmed.

In response to these developments, Bank of America equity research team has also upgraded its rating on Alamos Gold Corp. (NYSE:AGI) from Neutral to Buy.

Chart: Bank of America Predicts A Further 27% Rally In Gold

‘The Copper Supply Crisis Is Here’

The optimism extends beyond just precious metals, with Bank of America also sounding the alarm on a potential copper supply crisis.

According to Widmer, “raw materials are increasingly dance to their own tune,” and copper is seen at the “epicentre of the energy transition.”

The bank predicts significant increases in copper prices, driven by a variety of factors including green technology investments, thin inventories and global economic recovery.

Copper prices are expected to average $10,750 per tonne in 2025, climbing to $12,000 per tonne in 2026.

Widmer points out the critical situation in copper mine supply which is beginning to seriously impact refined production. “Tight copper mine supply is increasingly constraining refined production: the much-discussed lack of mine projects is finally starting to bite,” he explained.

Although advancements in electric vehicle (EV) technology have reduced the amount of copper required in new models—Tesla Inc‘s (NASDAQ:TSLA) latest 48V system reportedly needs 75% less copper—the demand from other sectors remains high. Notably, copper is crucial for applications such as data center cabling and the electricity network, covering power generation and transmission.

Following this optimistic forecast, the bank has also upgraded its ratings for copper producers Freeport–McMoran Inc. (NYSE:FCX) and Hudbay Minerals Inc. (NYSE:HBM) from Neutral to Buy, signaling expected strong performance in the copper sector.