BofA sees gold above $1,300 on fiscal deficit

Bloomberg

Gold is set to surge over next year as concerns deepen about the widening US budget deficit and a tariff-driven trade war starts to damage the country’s economy, according to Bank of America (BofA) Merrill Lynch .
Bullion could average $1,350 an ounce in 2019 as corporate tax reforms worsen the US fiscal balance, Francisco Blanch, head of global commodities and derivatives research, said. Spot gold traded at $1,208.70 on Friday and has averaged $1,285 this year.
“We’re still pretty constructive longer term on gold,” because of worries over the future of the US economy even though it’s performing relatively well right now, said New York-based Blanch. “In the short run, the effects of strong dollar, higher rates dominate. But in the long run, a huge US government budget deficit
is pretty positive for gold,”
he said.
The warning over the budget echoes billionaire hedge fund manager Ray Dalio, who predicted this month that the US economy is about two years from a downturn, which will see the dollar plunge as the government prints money to fund a swelling deficit. Goldman Sachs Group Inc. has also joined the chorus of bulls, seeing gold at $1,325 in
12 months.
Bullion has been building a base around $1,200, after five months of losses, the worst run since 2013. The Congressional Budget Office has predicted the US dministration’s tax cuts, when combined with new federal spending, will push the budget deficit to $1 trillion in 2020.