Gold is anticipated to thrive if the Federal Reserve proceeds with a rate cut, which many market players expect. This potential decision comes amid persistent inflation that clocked in at an annual rate of 2.9% for August. According to analysts at Bank of America, historical trends indicate that gold prices typically rise when the central bank eases monetary policy while inflation exceeds its 2% target.
In a report shared with clients, Bank of America’s commodity analysts highlighted that gold has never depreciated during previous periods where the Fed enacted easing policies alongside above-target inflation over the past 25 years. Notably, excluding the parameters of the Global Financial Crisis, gold has historically yielded an average return of approximately 13% annually in such inflationary easing scenarios.
Bank of America has issued a bold forecast, projecting that gold prices may soar to $4,000 per ounce by 2026. As of mid-morning Tuesday, gold futures have already seen an impressive rise of over 40% in 2025, reaching $3,729 per ounce.
Central banks around the globe are also contributing to this bullish outlook, amassing gold reserves that now surpass their holdings in U.S. Treasuries. This shift reflects rising concerns regarding the independence of the Federal Reserve, particularly under the current administration, prompting these institutions to bolster their gold holdings as a hedge.
Additionally, the U.S. dollar has experienced a significant decline, dropping more than 10% in 2025 against a basket of major foreign currencies. This depreciation further enhances gold’s appeal as a safe-haven asset, alongside its historical performance during periods of monetary and fiscal uncertainty.
