Wednesday, June 23, 2010

Bank Of America Bulling Longer Term, But...

...isn't so in the nearer term. The institution's gold research arm expects the revaluation of the renminbi to soften gold prices in the near term.
"We have always worked under the assumption that a CNY revaluation would be gold negative, as it could result in a reversal in FX reserve accumulation flows," says Bank of America.

However, given the backdrop of growing sovereign risks in Europe and further EM FX stock rotation into gold, Bank of America believe the near-term downside risks to gold prices are small at this stage.

"Thus, we maintain our $1500/oz target by the end of 2011. Moreover, a gradual appreciation of the CNY and other EM currencies could exacerbate capital inflows into EMs, supporting gold accumulation over the coming months and dampening the effects of declining trade imbalances," reads the research note.

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