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(Kitco News) - Bank of America commodity analysts just keep getting more bullish on gold as the weeks go by.

The bank said in a report last week that gold ’s technical momentum could drive prices to an all-time high this year; in a new report published Tuesday, analysts have officially increased their bullish outlook, saying that gold prices could hit $3,000 within 18 months, a 50% increase from its previous forecast

Along with increasing its 18-month target, the bank said that it sees gold prices averaging $2,063 an ounce in 2021.

“As economic output contracts sharply, fiscal outlays surge, and central bank balance sheets double, fiat currencies could come under pressure. And investors will aim for gold,” the analysts said.

Although a strong U.S. dollar and weak physical jewelry demand in Asia could be headwinds for the gold market, the analysts said that the Federal Reserve has provided enough momentum to propel investment demand and prices higher.

Economists at Bank of America have warned that the Federal Reserve’s balance sheet as a percentage of GDP could rise 20% to 40% this year. According to reports last week, the Federal Reserve’s balance sheet hit a record high of $6.42 trillion, up more than 50% from levels reported during the first week of March.

The analysts noted that the Federal Reserve: “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 analysts said.

Although investor sentiment has improved slightly during the last few weeks, the bank’s analysts said that there is still more bad news ahead. They noted that economists are forecasting a 30% decline in the U.S. GDP in the second quarter as the economy was grounded after all non-essential businesses were closed and citizens were requested to stay at home.

“As central banks rush to expand their balance sheets and backstop the economy, a lot of risks could effectively be socialized, boosting the appeal of gold,” the analysts said.

Weak economic growth does not bode well for equity markets, the analysts said, adding that this will be another factor supporting higher gold prices.

“The positive equity/gold correlations are a possible sign that equity markets may not have fully bottomed and that the gold market has further room to run, in our view. The trigger here could be an extension of lockdown restrictions over the next few weeks,” the analysts said.

Despite the strong bullish sentiment, Bank of America does see some risks in the marketplace. Along with weak physical demand, the analysts said that central bank gold purchases are expected to slow this year.

They also noted that lower market volatility could also weigh on gold prices.