Interest in gold has been muted in recent quarters compared to other asset classes, partly because rising real rates and a stronger US dollar offered no incentive to increase exposure to gold.
Markets and investors have also increasingly focused on the role metals will play in the energy transition and gold is not one of the so-called metals important for future technologies (MIFT).
“These factors, among others, have prompted some soul-searching among market participants. However, we think calling the death of gold is premature,” BofA commodity strategist Michael Widmer said.
Gold prices have surged to their highest level in over eight months at the start of the year, fuelled by expectations of a weaker US dollar and recession worries.
Gold is expected to remain a mainstay to 2026 with macro conditions turning bullish, BofA said.
“It is true gold miners are increasingly discussing the merits of diversifying into copper, and data from our colleagues in equity research confirm that some senior gold miners have entered into the base metals,” Widmer said.
“However, a look at the revenue breakdown suggests gold will remain the mainstay until at least 2026.”
Also, the macro backdrop is turning bullish gold.
“Taking a longer-term perspective, our analysis also confirms that the yellow metal can be a potent portfolio diversifier,” the investment bank said.
New ESG standards for gold could also bolster investor confidence.
“With ESG now a major focus, there are concerns over how gold scores given it is not a MIFT and amid allegations of child labour or mining in conflict areas,” said Widmer.
“In response, the gold industry has put standards in place to give investors confidence the yellow metal has been produced and sourced responsibly.”
The Responsible Gold Mining Principles are a framework setting out expectations for consumers, investors and the downstream gold supply chain as to what constitutes responsible gold mining. Meanwhile, the Responsible Gold Guidance (RGG) is followed by LBMA (London Bullion Market Association) accredited refiners to ensure they have responsible sourcing procedures.
