Bank of America Corp., Citigroup Inc. and Macquarie Group Ltd. have been vocal cheerleaders for gold during a breakneck rally that has taken prices to record highs above US$3,000 an ounce. With anxiety about the global economy growing, they see plenty of reasons to stay bullish.
Gold has been on the charge since late 2022, with elevated central-bank purchases and a buying spree in China causing prices to almost double in a little over two years. Now, it is bullion’s time-tested status as a haven asset that’s drawing investor interest.
Prices broke through the $3,000 an ounce barrier on Friday, against a backdrop of growing angst about the economic risks arising from US President Donald Trump’s disruptive trade agenda. US consumer confidence has plunged, while inflation expectations have surged, and as the apprehension grows, many analysts have been hiking their price targets.
“We do still think there are some materially bullish developments likely to come for gold,” said Marcus Garvey, Macquarie’s head of commodities strategy, who raised the bank’s top-end price target from $3,000 to $3,500 last week. “I don’t really see things that would suggest to us that this rally is in an area that’s become frenzied or overextended.”
Here, illustrated in four charts, are the key factors that have Wall Street betting that bullion’s blistering rally has more room to run.
ETFs
Investors are net buyers of physically-backed gold exchange-traded funds this year, after selling them for the past four years. North America saw a major inflow in February, the largest in a single month since July 2020, according to the World Gold Council. That was partly helped by sentiment stemming from a worldwide rush to ship bullion into the US to capture the large price differential between New York’s Comex and the spot London market.
Concerns over a slowing economy may also prompt US households to seek to diversify their portfolios by buying gold ETFs, according to Citigroup analyst Max Layton. “That’s the big development that’s taking us that next step higher,” he said.
“While there’s been a lot of central-bank buying and evidence of high-net-worth individuals buying over the last 12-18 months as a hedge against downside risks in equities and US growth, the household hasn’t really bought yet — and they’re potentially only just starting,” Layton said.
For Matt Schwab, head of investor solutions at Quantix Commodities, whether ETF holdings can keep rising is crucial to gold’s move higher. ETFs played an important role in the precious metal’s rally to then-record highs during the pandemic.
Overcoming Headwinds
While gold tends to thrive during prolonged periods of economic weakness, analysts caution that bullion may get hit in the short run if there’s a heavy selloff in the stock market, as investors may opt to exit profitable gold positions to cover losses elsewhere.
“Sometimes it can get messy, as we’ve seen in 2008/2009 period, we’ve seen the pandemic: gold gets hit very hard along with all other asset classes as well when there is a big risk-off move,” said Bart Melek, global head of commodity strategy at TD Securities.
Michael Widmer, Bank of America’s head of metals research, agrees that gold could be set for short-term turbulence as investors take profits, but he still sees bullion rising further to $3,500 over the long run.
Buying could also reaccelerate in China this year, thanks to Bejing’s initiative to let insurers invest in precious metals, according to Widmer. The policy could create 300 tons of additional demand, equivalent to 6.5% of the annual global market, he estimates.
Real Rates
One striking feature of gold’s two-year bull run is that it has come despite a surge in interest rates. Typically, higher inflation-adjusted interest rates act as a headwind for gold, because bullion pays no interest, and investors can make safe and attractive returns in government bond markets.
But higher debt and deficits have meant that some investors are now pricing in an element of credit risk in some developed economy government bonds, pushing some of them to gold, according to Macquarie’s Garvey.
“Other than something like a failure to lift a debt ceiling leading to a technical default, I don’t think anyone is arguing that the US is ever going to default in dollar terms, and most countries are never going to default in local currency terms,” Garvey said.
“But if you are running an unsustainable fiscal backdrop, you are then implicitly devaluing your own currency, and gold as the hard currency really benefits from that.”
Central-Bank Buying
Central banks were the main driver behind gold’s ferocious run in 2024. They continued to buy the precious metal this year even as prices kept rising, with 18 tons of net purchases in January, according to the World Gold Council.
China’s central bank, which played a crucial role in gold’s spectacular rally last year, expanded its gold reserves for a fourth month in February, with total holdings at 73.61 million ounces by the end of last month.
Goldman Sachs — which raised its year-end forecast to $3,100 just last month — now sees a growing likelihood of an even bigger rally, driven by strong central bank buying and rising investor demand.
That’s “because US policy uncertainty may support investor demand, and because we believe that central bank gold buying will remain structurally higher,” Goldman analysts said in an emailed note on Friday.
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Yvonne Yue Li, Mark Burton, and Jack Ryan
–With assistance from David Marino.
©2025 Bloomberg L.P.
