BNP Paribas Wealth Management now targets $5,000-an-ounce gold within 12 months, implying more than 20% upside from current levels. The bank points to central-bank buying, returning ETF inflows, and an expected dollar decline as the drivers. A political overlay – President Trump's pressure on the Federal Reserve – adds another leg to the dollar-weakness case.
Gold pushed to its highest level since February, and BNP Paribas Wealth Management is telling clients the rally has room to run. Speaking on Bloomberg's Insight with Haslinda Amin, Shafali, Head of Investment Services Asia at BNP Paribas Wealth Management, said the bank's target is $5,000 an ounce within 12 months, implying over 20% upside from current levels.
Bullion was trading higher by 0.8% during the segment, coinciding with easing geopolitical stress after reported Iran-Oman shipping accord talks kept Brent crude just under $80 a barrel. According to Shafali: "We have a target of 5000 in the next 12 months."
Dollar Strength and Rate Fears Explain the Lag
The dollar's strength and rate-hike concerns kept gold underperforming the bullish setup many strategists sketched at the start of the year, Shafali said. The dollar had gained 3% before recent days and is giving some of that back.
The 10-year Treasury yield, meanwhile, sits at 4.63% after touching 4.75% on July 31. Consumer prices remain firm, with the CPI at 332.6 in June, well above the Fed's comfort zone.
Central Banks Plan to Add Gold
BNP's demand case rests on two pillars. On the official side, 89% of central banks surveyed by the World Gold Council said they expect to increase their gold allocation, Shafali said, and the bank expects retail ETF flows to return as geopolitical tensions calm.
The most common U.S. vehicle for that flow is the SPDR Gold Trust (NYSEARCA:GLD), the largest physically-backed gold ETF, which carries a 0.40% expense ratio per its latest fact sheet. If ETF inflows resume alongside central-bank buying, price-insensitive and tactical demand would land on the same side of the market.
BNP Sees the Dollar Falling 3.5%
BNP expects the dollar to decline roughly 3.5% over the next 12 months, driven partly by inflation concerns, partly by U.S. debt concerns, and by investors' need to diversify, Shafali said. The U.S. trade deficit stood at -$73.3 billion in June, extending a run of wide monthly gaps that pressure the greenback over time. Investors, in her view, have become overexposed to the dollar without realizing it.
Trump's Pressure on the Fed
A political dimension sits on top of BNP's structural case. According to CNBC's Jeff Cox, Trump has publicly backed Kevin Warsh as a potential Fed chair while pressing for lower rates and criticizing sitting Fed officials, and that pressure campaign has become part of the dollar-weakness narrative traders are pricing in.
The 10-year/2-year Treasury spread has steepened to 0.45% from a June low of 0.27%, consistent with markets gradually pricing in easier policy ahead. BNP's $5,000 figure remains the bank's forecast, not investment advice.
Source: 24/7 Wall St.
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