Gold prices may surge by over 16 per cent in the next 18 months, potentially reaching USD 3,500 per ounce if non-commercial purchases increase by 10 per cent, according to a report by BofA Global Research.
The report suggested that even a minor rise in investment demand could significantly impact gold prices this year.
It projected that should investment demand increase by merely 1 per cent, the average price of gold in 2025 could hover around USD 3,000 per ounce.
"Gold could potentially reach USD 3,500/oz over the coming 18 months, if non-commercial purchases increase by 10 per cent," the report stated.
However, for this to materialise, a substantial increase in investment demand would be required—an objective that, while challenging, remains feasible.
Among the factors likely to drive demand, the report highlighted China’s insurance industry, which can allocate up to 1 per cent of its assets to gold. This alone would account for nearly 6 per cent of the total annual gold market.
Further, central banks worldwide, which currently hold approximately 10 per cent of their reserves in gold, could expand their gold holdings to over 30 per cent as part of efforts to optimise portfolio efficiency.
If implemented, such a strategy would exert upward pressure on gold demand.
Retail investors are also contributing to the rising demand for gold.
The report noted that assets under management in physically backed gold exchange-traded funds (ETFs) had risen by 4 per cent year-on-year across the Americas, Europe, and Asia.
This trend indicates that individual investors are increasing their exposure to gold, possibly in response to economic uncertainties and market volatility.
Another key factor supporting gold prices, the report observed, is the uncertainty surrounding U.S. trade policies under the Trump administration.
It indicated that concerns over trade policies could result in a weaker U.S. dollar, thereby pushing gold prices higher in the near term.
Additionally, broader fiscal and trade deficits in the U.S. could contribute to a macroeconomic environment conducive to gold’s appeal as a safe-haven asset.
BofA Global Research further examined the fundamental market factors influencing gold prices, including mine production, scrap supply, jewellery demand, and investor purchases.
The report cautioned that since scrap and jewellery demand often fluctuates with prices, market equilibrium remains difficult to forecast without reference to a specific price point.
Nevertheless, it suggested that if investment demand sustains its upward trajectory, gold prices may remain strong in the coming months, driven by continued global economic and policy uncertainties.
Follow us
