BANK OF AMERICA: Buy these 5 commodities now for profits into next year as pandemic uncertainty boosts their prices and lifts gold to $3,000

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  • Gold is hitting new highs above $2,000 an ounce as economic uncertainty persists. But it's not the only commodity benefiting.
  • Bank of America has compiled a list of five commodities to invest in for gains heading into 2021.
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As COVID-19 cases continue to spike around the US and questions persist about the timeline of a potential vaccine, investors remain uncertain. 

As a result, many commodities — perhaps most notably gold, which reached record high prices of over $2,000 per ounce this week — are seeing a boost in value.

According to an Aug. 4 note from Bank of America, certain commodities should continue to see price spikes into next year. 

"Loose monetary and fiscal policies around the world have been supportive to most mined commodities," Bank of America Commodity Strategist Michael Widmer said in the note. "With the US elections scheduled for November and the EU's Recovery Fund in place from January 2021, we expect demand to be supportive next year, even though the pandemic continues to be an immense risk." 

He continued: "It is worth noting too that some of the announced stimulus packages have a green component. This matters for MIFTs (metals important for future technologies) as a reduction in the usage of fossil fuels means the world needs to be powered by alternative solutions, almost all of which require mined commodities."

Widmer highlighted five commodities in particular that his team is bullish on heading into next year.

5 commodities to buy now for profits into 2021

Bank of America is bullish on gold, which has hit all-time highs in recent days. They raised their 2020 estimate of $1,886 per ounce to $2,240 in 2021 — and said it could rise all the way to $3,000 an ounce.

"Gold has rallied over falling real rates. Continued fiscal spending as governments are mending the damage from Covid-19, backstopped by central banks means that interest rates will remain low, at the same time as the economy reflates," Widmer said in the note. "Financial repression may be with us for a while, so we reinforce our $3,000/oz forecast." 

The GraniteShares Gold Trust (BAR) is one option for investors to gain exposure to gold.

With a 2020 price estimate of $2.75 per pound, Bank of America expects copper to rise to $3.18 per ton in 2021. They also called $3.40 per pound "feasible."

"Considering that many mines in Latin America are operating with skeleton staff only, there is a risk output losses will stretch well into 2021," the note said. "At the same time, the global economy should rebound, supported by fiscal stimulus. As such, copper could hit $7,500/t ($3.40/lb) next year."

Investors looking for exposure to copper might also consider the iPath Bloomberg Copper Subindex Total Return ETN (JJC).

Widmer expects nickel to rise to $18,750 per ton in 2021, representing about a 30% gain from its current level. He cited the growth of the electric vehicle industry as one reason.

Those seeking broader exposure to nickel might consider the iPath Series B Bloomberg Nickel Subindex Total Return ETN (JJN).

Fourth, the bank expects silver to rise to $31.25 in 2021, backed by the rising popularity of solar panels, high investor interest, and an eventual rebound in manufacturing.

One ETF offering exposure to silver is the Aberdeen Standard Physical Silver Shares ETF (SIVR).

Lastly, the firm is bullish on both Brent and WTI crude oil. The bank has raised its 2020 price estimates of $43 and $40 a barrel, respectively, to $50 and $47 in 2021 as they expect a recovery in demand into next year.

Investors seeking exposure to WTI crude oil might consider the Invesco DB Oil Fund (DBO); and those looking for exposure to Brent crude oil might consider the United States Brent Oil Fund (BNO).

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