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Gold's surge to $3,000 spurs Bank of America to raise price target
2025-03-27 06:52:25

(Kitco News) - Gold’s rally above $3,000 has prompted America’s second-largest bank to increase its price target for this year and to solidify its longer-term target.

In their latest commodity report, analysts at Bank of America announced that they expect to see an average gold price of around $3,063 an ounce this year, with prices jumping to $3,350 in 2026, up from the previous average price forecasts of $2,750 an ounce and $2,625 an ounce, respectively.

The analysts also said that they see gold prices rising to $3,500 within two years.

Last month, Bank of America said that the gold market would need to see investment demand rise by 10% to hit $3,500.

“That’s a lot, but not impossible,” the analysts said in the report. “Where could demand come from? China’s insurance industry can invest 1% of its assets in gold, equivalent to around 6% of the annual gold market. Central banks (CB) currently hold about 10% of their reserves in gold and could raise this figure to +30% to make their portfolios more efficient. Finally, retail investors have also been increasing their exposure to the yellow metal, with assets under management at physically backed ETFs increasing by 4% YoY YTD in the Americas, Europe, and Asia.”

Not only have gold prices pushed above $3,000, but growing economic uncertainty and a correction in U.S. equity markets are driving retail investors back into the gold market. Bank of America noted that investment demand in gold-backed exchange-traded funds has grown by 4% so far this year.

“This is a remarkable change from the lack of interest in those vehicles in recent years. That said, the inflows still run short of the 10% increase in total investment demand required for gold prices to hit US$3,500/oz,” the analysts said.

Looking ahead, the analysts have said that concerns over the strength of the economy and expectations that the Federal Reserve will be forced to cut interest rates more aggressively than current forecasts will provide important support for investment demand through the rest of the year.

Bank of America also noted that President Donald Trump’s America First policies to reduce its global trade deficit could encourage central banks to further diversify away from the U.S. dollar.

“A balanced US current account may require lower capital inflows going forward; if this is accompanied by a shift from ‘America First’ to ‘America Alone,’ CBs may further reduce USD holdings, with gold being a beneficiary,” the analysts said. “Indeed, we believe continued central-bank reserve diversification will be a key medium-term gold price driver.”

The optimal gold reserve for central banks

Central bank gold demand has been a critical factor behind gold’s rise to the $3,000 level; while global reserves have seen a significant increase in the last three years, Bank of America argues that they still need to go higher.

“Looking at gold as an effective portfolio diversifier, central banks have an 11% gold allocation in their FX reserves, up from 5.5% in 2000, so investment in the yellow metal has already come a long way,” the analysts said. “Yet, central banks could diversify further.”

Bank of America said that in an average central bank portfolio, 30% in gold would be the most efficient.





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