Bank of America signals caution for gold as physical demand wanes

Commodity analysts at the bank expect gold prices to struggle in the coming months, projecting a potential dip to $3,750 an ounce by the fourth quarter. While exchange-traded funds have seen positive inflows over the last two months, experts suggest this stability is fragile. If prices remain weak, investors may eventually liquidate positions, compounding existing downward pressure on the market.

Beyond ETF flows, the broader physical market is showing signs of fatigue. Key participants, including central banks in China and India, have collectively slowed their purchasing activity. Analysts also pointed to the escalating conflict in the Middle East as a factor that could prompt central banks to resume selling their holdings, further eroding a pillar of support that has historically bolstered gold values.

For a sustained recovery, the market requires a fundamental shift in the monetary environment. According to the report, gold is likely to find a bottom only when Federal Reserve policy turns dovish, the U.S. dollar stops its appreciation, and global geopolitical tensions subside. Absent these changes, the only other catalyst for a bullish reversal would be a renewed surge in concerns regarding U.S. currency debasement. Should fiscal policy become less orthodox—or if the Treasury intervenes in bond markets in a way that signals fiscal repression—gold could reignite its long-term uptrend.