Commodities analysts at Bank of America (NYSE: $BAC) are warning that gold’s price could fall further in coming months.
The second largest U.S. lender says that gold’s year-to-date correction may have further to run, noting parallels to the bear markets that followed the metal’s past peaks in 1980 and 2011.
Bank of America says that gold falling below the key support level of $4,000 U.S. per ounce in recent days is an ominous sign for the precious metal.
As such, the bank says the price of gold bullion could drop as low as $3,300 U.S. by year’s end, especially if the U.S. Federal Reserve raises interest rates as expected.
Higher interest rates exert downward pressure on non-yielding assets such as gold.
In a note to clients, Bank of America identifies several bearish signals that it says raise the risk of a prolonged decline for gold.
Those bearish signals include the formation of a death cross chart pattern and a Relative Strength Index (RSI) reading of 90, a level consistent with previous tops in 1980 and 2011.
Bank of America concludes its note on gold by stating that the three bear markets in gold that have occurred since 1970 have each resulted in at least a 50% drawdown in the metal’s price.
Gold’s price peaked at an all-time high of $5,589.38 U.S. an ounce this January. Since then, the price of the yellow metal has fallen 29% to trade at $3,992.40 U.S. per ounce.
