Bank of America’s top metals strategist, Michael Widmer, said Wednesday that gold (GC=F) is “overbought but underinvested,” with runway to grow.
Over the past year, gold prices have gained more than 60% in a hectic run-up, and the precious metal has been overbought as investors piled into a bandwagon trade. But, Widmer said, “Gold bull markets don’t normally come to an end because they’re overbought.”
Instead, “the gold markets normally come to an end because the underlying conditions that triggered a bull market have subsided, but we don’t see that.”
Higher debt loads constraining US monetary policy, central banks continuing to rotate out of treasuries, and a continued under-allocation in institutional portfolios all point to demand that’s likely to remain solid even if the market sees a small pullback to curb some of the frenzied 2025 buying, according to BofA.
If gold demand continues to grow at a pace roughly in line with the average demand rate since 2001, at around 14%, Widmer said, the precious metal is likely to crack $5,000 per ounce in 2026.
His team sees plenty of potential for such movement. Globally, gold holdings account for around 4% of the total equity and fixed income markets, with room for that allocation to grow, especially as institutional investors who may not have fully jumped in yet continue to add gold as a portfolio diversifier — hence, “overbought, but underinvested.”
And in another sign of steady demand, Widmer said, central banks hold more gold than US Treasurys for the first time since at least the 1990s.