In a report titled "The Fed can't print gold," commodity analysts at the Bank of America Corp raised their bullish stance on the yellow metal, saying that it could hit $3,000 an ounce within 18 months.
The bank's previous 18-month target was $2,000 an ounce.
The 50 percent increase in the forecast comes as policymakers in major economies release huge amounts as a monetary stimulus to support their countries as COVID-19 controlling measures continues to threaten jobs and income losses.
How will this affect Indian consumers of gold?
Change in the international prices is reflected well in gold rates in India since most of India's demand for the metal is met by imports. The metal is bought in dollar terms from the global market, therefore, both the movement in international prices and rupee's valuation affects domestic rates you pay at your local jeweller.
Earlier this month, gold price touched a new all-time high of Rs 45,724 per 10 grams on the Indian commodities market (MCX) after international gold price (in the US market) breached the $1,700 an ounce mark.
In the US market, the all-time high for gold was seen at $1,923.70 an ounce on 6 September 2011, during the financial recession. Today the price is hovering near $1,700 and has not touched record levels yet.
Bank of America sees gold averaging $2,063 an ounce in 2021 as investors are likely to seek refuge in the safe-haven metal as economies crash.
Economists at BofA believe that the US Federal Reserve's balance sheet as a percentage of GDP could rise 20% to 40% this year and noted that the American central bank "can't print gold."
"Beyond traditional gold supply and demand fundamentals, financial repression is back on an extraordinary scale. Rates in the US and most G-10 economies will likely be at or below zero for a very long period of time as central banks attempt to push inflation back above their targets," the report said.
Investor sentiment improved slightly in the last few weeks, but analysts said that there is still more bad news ahead.
They noted that economists are forecasting a 30% decline in the US GDP in the April-June quarter.
Meanwhile, China reported its first contraction in GDP in decades for the March-ended quarter.
With the top two economies declining, it is most likely that investors may move to gold until the COVID-19 threat is over and economies restart to reach the usual level of activity.
If rates were to hit $3,000 an ounce on rising demand and low supplies, it will definitely spike gold prices in India to levels never seen before.
Despite the bullish stance, BofA sees some risks like fall in physical purchases by consumers and central banks. Lower volatility is also expected to ease surge in gold prices.