Analysts at Bank of America have once again raised their gold price forecast. They see a path for the yellow metal to reach the $4,000 per ounce mark in the second half of the year. This is one of the most aggressive forecasts among major banks.
As recently as March, BoA had predicted that gold would likely cost $3,500 per ounce by 2027. In fact, the precious metal had reached this mark less than a month later. The analysts remain positive about the gold price but note that certain conditions must be met for it to reach $4,000 per ounce.
This includes, they said, that investment demand for the precious metal must increase and jewelry demand must stabilize. As the experts explained, an 18% year-on-year increase in investment demand would be necessary to reach this mark. While this may sound like a lot, gold purchases increased even more in 2016 and 2020. So the possibility exists.
Concern About the Financial Situation of the USA
Regarding the potential trigger for a year-end rally in the gold price, Bank of America points primarily to global uncertainty, particularly due to trade policy. Concerns about the financial situation of the USA could then trigger the next rise in the gold price, they continued. The analysts believe that gold could ultimately be a less risky investment than government bonds.
US President Trump has declared his tariff policy as a strategy to reduce government debt, but tariffs are not a reliable source of income and tend to create economic uncertainty as growth slows and consumer prices rise.
Tariffs are thus an essential part of Trump’s political toolkit, but unfortunately, they also affect inflation expectations. This puts the Fed in a difficult position, according to BoA: The slowdown in the economy combined with upward pressure on the general price level would indicate that real interest rates will remain low – which also supports the gold price.
In the short term, the experts also see gold well supported at $3,000 per ounce, even though the still high prices would burden jewelry demand. In the current situation, gold could comfortably trade above $3,000 per ounce, but not above $3,500. Currently, an ounce of the precious metal costs around $3,324. With this, the gold price has already recorded a gain of nearly 27% since the beginning of the year.
