Gold’s recent surge has caught the eye of investors, but according to Bank of America analysts, while the metal may be overbought in the short term, underlying factors suggest it is still underinvested and poised for potential gains in 2026.
"The magnitude of the current rally is not out of the ordinary when compared to any of the gold bull markets since 1970," analysts wrote, adding that sharp monthly price declines of more than 10% have historically been followed by strong rallies.
The bank’s Q4 2025 forecast anticipates a modest pullback to around $3,800 per ounce, reflecting extended positioning and recent corrections. Yet, the team sees further upside for next year, projecting gold could reach $5,000 per ounce if macroeconomic conditions remain supportive.
Rallies, the analysts caution, tend to falter only when the fundamental drivers change. "Gold prices stopped pushing higher only once the underlying drivers changed," they wrote, highlighting events that fueled previous bull markets, from the oil crisis and stagflation in the 1970s to quantitative easing and the COVID pandemic. Today, elevated US fiscal deficits and unconventional macro policies continue to underpin gold’s appeal, analysts said.
Bank of America also weighed in on portfolio strategy, pointing out that gold remains underrepresented. "Total gold investment relative to equity and fixed income markets still hovers at just 5% at present, suggesting that there are still pockets of underinvestment," the analysts wrote.
With central banks diversifying and emerging market monetary authorities allocating roughly 16% of their reserves to gold, analysts say the metal’s role in portfolios is set to grow.