“QE-Infiniti” to Push Gold to $2,400 by 2014

The latest firm to raise its gold forecast in light of the Federal Reserve’s decision to launch a third round of quantitative easing (QE3) was Bank of America Merrill Lynch.  Francisco Blanch, head of global commodities at the firm, predicted that the yellow metal will reach a new all-time high of $2,400 per ounce by 2014.

In a note to clients, entitled “Gold Under QE-Infiniti,” Blanch wrote that “The new target reflects our view that the Fed will maintain mortgage purchases until the end of 2014 and will move to buy Treasuries following the end of Operation Twist this coming December.”

“Given the new open-ended nature of QE3, the upward pressure on gold prices should continue until employment is strong enough to require a change in policy,” he added.  “In our view, this is unlikely to happen until the end of 2014.”

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Blanch went on to say that “The combination of open-ended MBS purchases and the possibility of additional Treasury bond purchases starting in December could further lift gold prices by adding over $2 trillion to the Fed’s balance sheet over the next two years.”

Another noteworthy item from Blanch’s comments included him contending that gold is unlikely to fall below a “floor” price of $1,500 over the next decade due in large part to investment demand in emerging economies.  “With emerging markets getting richer,” he asserted, “their budget allocation to non-essential items such as gold will likely increase in the long-run.”