Bank of America (BofA) has revised its gold price projections for 2025 and 2026, reflecting an updated outlook influenced by ongoing global uncertainties, especially related to U.S. trade policies. In a recent note, the bank raised its forecast for gold to $3,063 per ounce (oz) for 2025 and $3,350/oz for 2026, up from its previous estimates of $2,750/oz for 2025 and $2,625/oz for 2026.
Gold prices have been on a strong upward trajectory, with spot gold currently trading around $3,024/oz, marking an impressive 15% increase so far this year. This rally has been driven by a combination of economic concerns and geopolitical tensions, primarily stemming from U.S. President Donald Trump’s unpredictable trade policies.
Trump’s tariff policies since his inauguration in January have been marked by volatility, with frequent threats, reversals, and delays creating an unpredictable environment that has fueled market uncertainty and increased demand for gold as a safe-haven asset.
Investment Demand and Central Bank Activity as Key Drivers
BofA emphasized that a further increase in investment demand could push gold prices even higher. Specifically, if investment demand grows by 10%, the bank suggests that gold could reach $3,500/oz within the next two years. Central bank activity also plays a significant role in the gold market. Currently, central banks hold around 10% of their reserves in gold, but BofA notes that this figure could rise to over 30%, providing a substantial boost to prices.
Risks to the Gold Rally
While the outlook for gold remains positive, BofA cautioned that there are risks that could temper the metal’s rally. These include the potential for fiscal consolidation in the U.S., reduced geopolitical tensions, and a return to more cooperative inter-governmental relations. Specifically, a reduction in the scope of tariffs or more targeted tariffs following Trump’s anticipated reciprocal tariffs set for April 2 could reduce the demand for gold as a hedge against uncertainty.
Despite these risks, the primary market focus remains on the potential impact of the reciprocal tariffs that the Trump administration is expected to adopt on April 2. The uncertainty surrounding these policies continues to support gold prices in the near term.
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