Bank of America has raised its outlook on gold, setting a much higher price target for next year. Right now, gold trades near $3,330 per ounce, up more than 40% over the past year.
The bank now expects gold to reach $4,000 per ounce in 2026. That would be about 20% higher than current levels. Gold has been rising sharply for three years now. This year alone, it has already gained 45%. In the two years before that, gold went up over 20% each year. Over the past decade, total returns on gold have reached 180%. The reasons behind this growth are well known.
There has been an increase in purchases of gold by central banks, and a rise in demand from investors. The changes in supply and demand have led to upward pressure on gold prices.
The recent increase in gold prices is associated with economic uncertainty and geopolitical tensions in various parts of the world. Over the past three years, there have been wars between Russia and Ukraine, and between Israel and Iran
The US has also taken part in some military actions. But Bank of America analysts say that wars are not the main reason gold could climb more from here.
Gold is often used as a safe investment
Analysts at Bank of America say that gold is often used as a safe investment during global trouble, but long-term gold prices don’t rise mainly because of war.
Instead, they link gold’s future gains to Trump’s “Big and Beautiful” plan. Though the House and Senate bills are different, both versions could lead to a big rise in the U.S. deficit in the coming years. Trump’s plan includes tax cuts and more government spending. While it may help grow the economy, it is still expected to add $2.8 trillion to the national debt over the next 10 years.
BofA analysts wrote,“Therefore, regardless of the outcome of Senate negotiations, market concerns about fiscal sustainability are unlikely to abate. Interest rate volatility and a weaker US dollar should continue to support gold, especially if the US Treasury or the US Fed are ultimately forced to intervene and support the market,” as cited by Shanghai Metals Market.
Central banks are purchasing more gold
The US dollar has fallen 10% this year. At the same time, gold has passed the euro as the second-largest global reserve currency. Central banks have kept buying gold, a trend that began years ago. A recent survey from the World Gold Council shows that many central banks in emerging markets are buying more gold due to global risks and trade tensions.
“This figure should serve as a wake-up call for US policymakers. Ongoing concerns about trade and the US fiscal deficit are likely to lead central banks to buy more gold rather than US Treasuries,” analysts warned.
As concerns mount regarding how the U.S. will manage its increasing debt, investors may continue to flock to gold, forcing prices to increase ever further.
In FY2024, US GDP was $28.83 trillion while the national debt was $35.46 trillion. This results in a Debt-to-GDP ratio of 123%, which highlights a potential risk in future debt repayment.
As of May 2025, the US is spending $776 billion just on interest payments for the debt. That’s 16% of the entire federal budget this year.
Global tensions impact gold prices
The World Gold Council agrees with Bank of America’s concerns. In a statement, the group said rising interest rates and global tensions do impact gold prices, but they are not the only reasons.
They added that growing worries about US government debt are also playing a role. While most still trust US Treasury bonds as safe, the chance of a major crisis, while small, is not ruled out.
The more likely outcome, they said, is a series of smaller financial shocks, as countries with high debt like the US hit limits on how much they can borrow. That kind of uncertainty could keep helping the gold market for some time.
