Bank of America has forecast that gold could reach $4,000 per ounce within the next year, citing ongoing geopolitical tensions and the relatively low exposure of investors to the precious metal. The bank’s optimistic outlook aligns with similar expectations from other financial institutions, which anticipate continued upward momentum for gold prices.
Geopolitical Uncertainty and Investor Demand Could Fuel Further Gains
In a note released last week, Bank of America analysts suggested that gold’s recent surge—up over 20% this year and breaking multiple all-time highs—could continue. With rising geopolitical instability and persistent market volatility, the bank sees a clear path for gold prices to climb further.
“The rally could persist as rate volatility and a weaker dollar drive investors toward safe-haven assets,” Bank of America explained. The bank also pointed out that despite gold’s price increase, investor exposure to the metal remains relatively low.
According to Bank of America, investors currently allocate about 3.5% of their portfolios to gold, still far from the 2011 peak when allocations reached higher levels. This underexposure could indicate room for further investment as the rally continues.
Central Banks Hold Significant Gold Reserves
While individual investors remain relatively underexposed, central banks have been increasing their gold holdings in recent years. According to Bank of America, central banks now hold around 18% of their reserves in gold, a slight decrease from the peak levels during the 1970s Bretton Woods era.
The European Central Bank (ECB) has also noted that gold remains the second-largest reserve asset held by central banks, following the U.S. dollar.
Geopolitical Risks Further Support Gold’s Appeal
Geopolitical developments are another key driver for gold’s potential rise. The recent Israel-Iran conflict, for example, sent gold futures surging to $3,440—just shy of the record high of $3,500. Oil prices also spiked in response to fears of an escalating conflict.
In addition to Bank of America’s forecast, JPMorgan previously suggested that gold could reach as high as $6,000 if the U.S. were to shift just 0.5% of its foreign assets into the metal.
As global uncertainties continue to mount, gold’s role as a safe-haven asset could push prices even higher, making Bank of America’s $4,000 target seem increasingly plausible.
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