The conflict between Israel and Iran has not yet escalated to a regional level. This seems to be enough for the market to allow gold, the safe haven in such geopolitical conflicts, to fall back below the $3,400 per ounce mark. With this, it appears that the yellow metal is continuing its recent consolidation for now. However, some analysts still see a path towards $4,000 per ounce for the gold price.
Bank of America, for example, believes that gold still has a lot of potential, as investment demand has just begun to pick up again. However, the experts do not believe that the situation in the Middle East will sustainably drive the precious metal upwards. Wars or conflicts are not always conducive to a higher gold price, but they do contribute to the mix of factors supporting gold.
US Debt Significantly more Important for Gold
Instead of focusing on specific geopolitical events, it is therefore better to consider the broader economic environment and gold’s growing role as a significant global means of payment, according to BoA. After all, US debt continues to grow at an unsustainable rate, increasing interest in gold, especially now that Congress is debating legislation that also includes tax cuts. This could increase the US deficit by trillions of dollars.
Concerns about the sustainability of fiscal developments in the US are unlikely to disappear quickly, regardless of how the debates turn out, Bank of America continues. Volatile interest rate developments and a weaker US dollar should therefore support gold in the future, according to the analysts, especially if government agencies or the Fed ultimately have to support the markets.
Given this, Bank of America continues to see a path towards $4,000 per ounce of gold, even if wars and conflicts are not sustainable price drivers. Especially since the world’s central banks are likely to continue buying gold instead of US bonds, should concerns about the US fiscal deficit not diminish.
Rally in Silver and Platinum also Positive for Gold
Bank of America also views the expanding rally in the precious metals sector as support for the gold price. Platinum and silver have also recently seen significant gains. “Although silver went through a phase of underperformance, the market remained in deficit, mainly due to limited mine supply. Therefore, market participants have long expected a normalization of the gold-silver ratio, which has finally occurred, accompanied by an increase in assets under management in physically backed ETFs”, the analysts said.
They have called for a target of $40 for silver by the fourth quarter of 2025, meaning the current rally has actually come a bit early. Nevertheless, they are sticking to their forecast. Should global trade relations normalize and worldwide economic growth pick up again, silver is likely to reach the next level, according to BoA.
