Gold continues to trade just below the $US4000 an ounce mark in New York, yet investor sentiment toward the precious metal remains overwhelmingly positive. According to a recent Bank of America report, the current rally mirrors past bull markets, with analysts predicting a temporary pullback before another major upswing.
The bank expects gold to dip to around $US3800 in the December quarter, followed by a powerful rebound that could drive prices to $US5000 by 2026. Michael Widmer, Bank of America’s commodity strategist, highlighted the unusual mix of an “overbought but underinvested” market, noting that central banks are still expanding their gold reserves as part of ongoing portfolio diversification.
Emerging market central banks currently hold about 16% of their reserves in gold, a figure still below the optimal allocation for maximising portfolio performance. Historically, a 5% gold allocation in traditional 60:40 equity-to-bond portfolios has provided strong returns. However, recent market dynamics suggest that a 60:20:20 mix – incorporating a greater gold component – would have produced even better results since 2020.
Overall, total gold investment compared to equity and fixed-income markets remains modest at around 5%, reinforcing the view that gold is still underowned.
Widmer added that recent volatility is “nothing unusual,” citing that monthly price drops of more than 10% have frequently occurred during previous gold bull markets, often paving the way for renewed strength. ETF activity remains the most unpredictable part of the market and could serve as a leading indicator for the next phase of the rally.
With central banks steadily buying and investors reassessing traditional asset mixes, gold’s long-term trajectory continues to look promising — despite short-term market swings.
Disclaimer: This report is for informational purposes only and should not be considered financial advice. Market conditions and forecasts are subject to change.
