The gold price has staged a spectacular rally in 2025, which, according to Bank of America, was supported by a whole host of macro factors. Analysts agree that the gold market is now overbought, which ultimately triggered the current correction.
This extended positioning was also a reason why experts expect an average gold price of USD 3,800 per ounce for the fourth quarter of this year – and that the yellow metal will rise to USD 5,000 per ounce in 2026. Nevertheless, the BoA continued, the extent of the current gold rally is nothing extraordinary when compared to gold bull markets since 1970.
However, a price decline of more than 10% is also not unusual, especially since the precious metal often shows strong increases afterwards. As the analysts further explain, purchases in the ETF segment are generally the most volatile, so the development of purchases in this area will likely be a strong indicator of future market direction, in their view.
“Bull Markets End when the Underlying Factors Change.”
As the bankers further explain, rallies are often fueled by a combination of factors. However, in the rallies since 1970, gold only ended its upward trend when the underlying factors changed. Currently, however, many of the macroeconomic factors that led to the rise of the yellow metal are still present, providing support for the gold price.
Bank of America advocates for a 60:20:20 portfolio allocation
According to experts, data continues to indicate underinvestment in gold despite the overbought impression. Central banks in emerging markets hold only about 16% of their reserves in gold, while model calculations would consider approximately double that amount as optimal for the risk-return profile. Historically, a 5% gold allocation to the classic 60:40 portfolio would have already benefited private investors. As correlations between equities, bonds, and precious metals have shifted significantly, the 60:20:20 approach (equities:bonds:gold) is gaining attention, according to the BoA – the analysis shows higher returns since 2020 compared to 60:40. Furthermore, despite the price increase, the total gold allocation relative to equity and bond markets is only about 5% – an indication of continued underweighting.
