Bank of America prediction: gold will not stay above 4000 dollars; When will the downtrend end?

Source link: Bank of America prediction: gold will not stay above 4000 dollars; When will the downtrend end? At a glance, Bank of America expects gold not to exceed $4,000 per ounce in the next 3 months and estimates the same figure for the fourth quarter of 2026. The bank predicts the average price of gold for the entire year 2027 at around $4,813 per ounce. Cash gold last time with a daily drop of 0.59 […] Source site: Safir Arjan

Bank of America expects gold to stay above $4,000 per ounce in the next 3 months and estimates the same figure for the fourth quarter of 2026.

The bank predicts the average price of gold for the entire year 2027 at around $4,813 per ounce.

Spot gold last traded at $4,168.90 an ounce, down 0.59% on the day.

Bank of America may see positive demand for gold ETFs as a negative sign for the market.

Bank of America predicts in its latest precious metals report that gold will not be able to stay above 4000 dollars per ounce in the next 3 months. According to the commodity analysts of this bank, the average price of gold in the fourth quarter of 2026 will be 4000 dollars. This cautious outlook comes as investment demand for gold exchange-traded funds (ETFs, funds backed by real gold) remains resilient despite persistent inflation, higher bond yields and a stronger dollar.

Bank of America analysts wrote: "We remain cautious in the short term as macroeconomic conditions remain difficult." However, they expect the average gold price to reach $4,813 in 2027. In its previous report, this bank had predicted that gold would drop to $3,750 per ounce in the fourth quarter. The reason given at that time was the high price of energy and continued inflationary concerns.

According to this report, the demand for gold ETF funds has been positive in the last 2 months. But the Bank of America can consider this as a negative sign. If prices remain weak, investors may sell their positions, increasing selling pressure. ETF demand alone cannot sustain the market as the broader physical gold market remains weak, the bank said.

The Bank of America's tracking tool shows that the main market players, central banks of China and India, have collectively slowed gold purchases. Analysts of this bank said: "This largely explains the recent pressure on gold."

Bank of America warned that demand from central banks, which has been one of the main pillars of market strength, could become a source of weakness by the end of the year. Analysts of this bank said: "With the re-escalation of the conflict in the Middle East, in our opinion, there is a risk that central banks will resume selling." According to them, about 90% of the increase in the value of gold reserves was due to price increases, not actual purchases.

The Bank of America's answer to the price floor question is clear: the market needs clearer signals from the Federal Reserve. Analysts of this bank have reached this conclusion by examining correlations, causal relationships and "principal component analysis" (a statistical method to find the main factors affecting the price). When the market wasn't worried about rising interest rates, gold rose in line with stocks. But as the Fed tightened, inflation soared and the dollar strengthened, gold came under severe pressure.

The analysts' conclusion is: "Gold is likely to bottom only when concerns about inflation and the Iran war subside, the dollar stops strengthening, and the Federal Reserve is no longer in a monetary tightening cycle."

The Bank of America sees another way for gold to rise: the return of the fear of the devaluation of the dollar. According to this bank, the US budget deficit is discussed a lot in the gold market, but the "temporary" increase alone has usually not benefited gold. Duration means the additional return that the investor wants to hold long-term bonds.

The bank's analysts said the end of the interest rate hike cycle, or more effectively, the return of concerns about "fiscal repression" are more important drivers. Financial repression means policies that deliberately keep interest rates low. According to them, if the US Treasury intervenes in the bond market, finances itself with short-term debt and the Federal Reserve keeps short-term rates low, fears of a weaker dollar will be revived. Bank of America calls this a "very bullish scenario for gold."

Overall, Bank of America is cautious on the short-term path for gold, but predicts higher prices for 2027. The key variables from this bank's point of view are the tone of the Federal Reserve, the trend of the dollar and the behavior of the central banks in the rest of the year.

Bank of America has not yet improved its short-term outlook on gold despite positive demand for ETFs. The bank ties the return of the upward trend to a change in the Federal Reserve's policy or the return of concerns about the depreciation of the dollar.

This report was prepared based on the analysis of the Kitco News website and the team of Sefir Arjan rewrote it for the Persian speaking audience.