BofA analysts highlighted that investment demand for bullion has grown so strongly that it now exceeds central bank Treasury holdings, underscoring gold’s appeal as both a hedge and a portfolio anchor. Even so, they warn that sentiment looks crowded, leaving the metal vulnerable to shifts in Fed policy or market expectations.
The immediate catalyst is this week’s FOMC decision. BofA’s team, led by Claudio Irigoyen, expects a rate cut on Wednesday, followed by a pause until December. Powell had already signaled the need for easing back in August, and weaker jobs data alongside softer consumer prices have since reinforced the case.
Traders now largely expect a rate reduction — the first since the Fed ended its hiking cycle in December — but BofA stresses the path forward is not straightforward. They see inflation, measured by the Fed’s preferred PCE index, remaining above 3% through the first half of next year, well above the 2% target. That backdrop could constrain how far and fast policymakers can cut.
The analysts caution that if the Fed tones down its dovishness, gold could face an “unwind” as speculative longs exit. Still, BofA maintains that in the medium term, gold remains one of the strongest hedges against sticky inflation and policy missteps — and their $4,000 target stands.
This article was written by Eamonn Sheridan at investinglive.com.