Spot gold breached the key $4,000-an-ounce support level on Wednesday, hitting its lowest point since November 2025, as a trifecta of hawkish Federal Reserve policy expectations, a stronger U.S. dollar and fading geopolitical safe-haven demand triggered a broad selloff in precious metals. Silver took the heaviest hit, tumbling 6.5% on the day, while gold notched an intraday drop of more than 3%.
In a fresh research report, Bank of America outlined a two-track outlook: near-term downward pressure will persist, but the long-term bull market for gold remains unbroken.
The primary driver of the downturn is a dramatic U-turn in interest rate pricing. The Fed held its federal funds rate target range steady at 3.50% to 3.75% at its June policy meeting, but its statement reinforced a firm commitment to price stability, dismantling the widespread market consensus for rate cuts that held sway earlier this year. According to the CME FedWatch Tool, traders now assign a 70% probability to a rate hike as early as September, with a second increase in December viewed as all but guaranteed.
The policy shift has pushed the U.S. dollar index to a more than one-year high, sharply raising the opportunity cost of holding non-yielding gold and steering capital toward dollar-denominated assets. Simultaneously, geopolitical risk premiums have unwound quickly. Following a U.S.-Iran memorandum of understanding, limited shipping has resumed through the Strait of Hormuz — the strategic waterway that handles roughly one-fifth of global crude oil flows — pulling Brent crude back toward the mid-$70s per barrel. Easing supply disruption fears have softened inflation concerns and further sapped safe-haven flows into gold.
Bank of America’s commodity strategy team this week downgraded its near-term gold forecast, abandoning its prior projection of $6,000 an ounce by next spring. That bullish target was built on expectations of sustained Fed rate cuts starting in 2025, a premise that has collapsed as policymakers shift toward additional tightening to counter energy-driven inflationary pressures. Analysts at the bank warned that gold faces further downside risk in the coming months, with a potential test of the $3,700-an-ounce level on the table as markets fully digest the hawkish policy pivot. A meaningful recovery in physical and investment demand will only take hold once tightening expectations are fully priced in, they added.
Despite the cautious near-term view, BofA — alongside peers Goldman Sachs and UBS — remains bullish on gold’s multi-year trajectory, citing intact structural drivers. Global de-dollarization trends continue to underpin official-sector demand: a recent central bank survey cited by the bank found nearly three-quarters of reserve managers plan to reduce their dollar allocations over the next five years, pointing to continued large-scale gold purchases by central banks. Retail investor penetration also has significant room to expand, with gold currently accounting for just 5.5% of global equity and fixed-income market holdings.
The bank also flagged a compelling valuation opportunity in gold mining equities. Based on price-to-net asset value calculations, the average mining company under BofA’s coverage implicitly prices gold at $3,354 an ounce — a 19% discount to prevailing spot prices — leaving scope for substantial valuation re-rating over the longer term.
Market veterans note the roughly 30% pullback from January’s record high is a familiar pattern in gold bull markets. The metal fell roughly 45% from its mid-1970s peak before surging to all-time highs in 1980, and dropped about 30% during the 2008 financial crisis ahead of its 2011 record run. Such corrections are typically driven by profit-taking and shifting rate expectations, not a fundamental breakdown of the long-term investment case.
While gold’s period of rapid gains has paused for now, the consensus holds that the broader bull market remains supported by persistent geopolitical uncertainty, elevated sovereign debt levels and structural central bank buying. The current pullback, in BofA’s framing, amounts to a short-term reset — not an end to the cycle.