Gold prices rose 65 percent last year, but the excitement has died down this year, and gold is currently nearly five percent lower than it was at the start of the year.
And that despite much higher inflation! Bank of America admits it got it wrong: its gold price target of $6,000 an ounce seems unlikely, especially since the US central bank could raise interest rates as early as September.
Bank of America released a note on June 22 arguing that the selloff opened up an opportunity, just not necessarily in gold.
TheStreet reported how the oil price shock caused by the Iran war fueled an unusual downward trend in gold as geopolitical risk rose.
Share prices in the mining sector have fallen more than underlying fundamentals warrant, Bank of America analysts said, leaving gold share prices well below where they are actually trading, SEEbiz reports.
Using a price-to-net asset value approach, Bank of America found that firms in its coverage universe were pricing gold at an average of $3,354 an ounce, a 19% discount to spot, Investing.com reported.
On an EV/EBITDA basis, the implied average was $4,016 per ounce, a smaller 3% discount. The difference within the group is wide.
Wheaton Precious Metals implied the highest gold price in BofA coverage at $4,395 an ounce, while Franco-Nevada implied the lowest at $2,416, weighed down by oil and gas exposure and the market’s ongoing discount to Cobra Panama contributions.
