Gold (XAUUSD) is up by 54% this year, although Bank of America believes that more upside is on the way in 2026. The firm notes that gold is both “overbought” and “underinvested,” propelling the precious metal higher amid a historic rally.
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Bank of America expects gold to trade at an average price of $4,538 per troy ounce in 2026 and sees a path to $5,000, implying upside of 23% from current levels, if “many of the macro drivers – including the unorthodox U.S. economic policies that pushed the yellow metal higher – remain supportive.”
Hawkish Fed Presents a Major Risk to Gold, Says Bank of America
These macro drivers could include rising government debt, higher inflation, and lower interest rates. However, the firm points out that a hawkish Fed presents a significant downside risk to gold. The Fed is characterized as having a hawkish view when it believes that inflation should be brought down with higher rates, even if it means slowing down the economy.
Higher rates are generally seen as a negative factor for gold because it doesn’t pay interest. In other words, higher rates result in a higher opportunity cost of holding gold relative to interest-bearing and safe-haven assets, such as Treasury notes and bonds.
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