Gold prices can rise 13% in 18 months to hit $3500 an ounce: BofA Securities

Gold prices could hit the $3500 an ounce (oz) mark in the next 18 months – up around 13 per cent from the current levels – given the global uncertainties and aided by investment demand, said analysts at BofA Securities in a recent note. 

 

Uncertainty around Trump Administration trade policies, BofA said, could continue to push the US dollar (USD) lower, further supporting gold prices near-term. A broad rebalancing of America’s twin deficits could be bullish gold, too.

 

"China’s insurance industry can invest 1 per cent of its assets in gold, equivalent to around 6 per cent of the annual gold market. Central banks currently hold about 10 per cent of their reserves in gold, and could raise this figure to 30 per cent to make their portfolios more efficient. Retail investors have also been increasing their exposure to gold, with assets under management (AUM) at physically backed ETFs increasing by 4 per cent YoY year-to-date (YTD) in the Americas, Europe and Asia," BofA said. 

 

The key risks to the upside in gold, BofA Securities said includes US fiscal consolidation, reduced geopolitical tensions, and a return to collaborative inter-governmental relations, including more targeted tariffs on April 2.

 

Meanwhile, gold dazzled in fiscal year 2024-25 (FY25) with a surge in prices of nearly 38 per cent, its best fiscal year show since FY08 as investors sought refuge in safer haven assets on global developments, especially Donald Trump’s tariff-related threats. BofA earlier had a price forecast of $3,000 an ounce for gold, which was breached recently.

 

To get gold to an average of $3,000/oz this year, investment demand in gold increased by just 1 per cent. For gold to hit $3,500/oz, it needs to rise by 10 per cent, BofA Securities said. 

 

That’s a lot, but not impossible, analysts believe. China’s Financial Supervision Administration (FSA), BofA said, has decided to launch a pilot program for insurance funds to invest in gold spot contracts, gold spot deferred delivery contracts, Shanghai gold centralised pricing contracts, gold price inquiry spot contracts, gold price inquiry swap contracts and gold leasing business listed or traded on the main board of the Shanghai Gold Exchange.

 

“Domestic insurers have invested a total of RMB 32 trillion, or $4.4 trillion. In keeping with the pilot’s outline (investment in gold shall not exceed 1 per cent of the company's total assets), the potential inflows into gold could be in the region of RMB 180-200 billion, or $25-28 billion,” BofA said. 

 

BofA Securities also expects Chinese companies to purchase gold actively and use their allowance within a year as insurers face declining investment returns in a low interest rate environment, while gold is regarded as a good long-term asset to hold. 

 

"Putting concrete numbers behind this, we could see around 300 tonnes of gold purchases, or 6.5 per cent of the annual physical market," the BofA note said.

 

Gold demand

 

Total gold demand (including OTC investment), according to the World Gold Council (WGC) rose 1 per cent year-on-year (YoY) in the December 2024 quarter (Q4-CY24/Q3-FY25) to reach a new quarterly high and contributed to a record annual total buying of 4,974 tonnes. 

 

As an investment strategy, Nigel Green, chief executive officer (CEO) of deVere Group that has nearly $14 billion worth of assets under management (AUM) says gold should be gaining weight in investor’s portfolios.

 

“Markets are already reacting. US equity futures are lower, European stocks have dropped, gold is at record highs, and treasury yields are falling. Risk aversion is spreading as investors digest the scale of disruption a globally applied tariff regime could bring. Exposure to export-heavy cyclical sectors, particularly in Europe and Asia, now carries increased downside,” he said.