Gold prices have reached unprecedented levels in 2025, igniting discussions about a significant market rally. However, a recent analysis by Bank of America (BofA) Global Research indicates that the dynamics within the gold sector are more complex than mere price fluctuations. While gold has seen substantial gains, it has yet to achieve several key benchmarks that characterized previous cyclical peaks, particularly when comparing its value to the broader equity market and its historical valuation metrics.
This year has witnessed a remarkable surge in gold prices, attributed chiefly to its traditional role as a safe haven against inflation and macroeconomic turbulence. On September 2, gold prices surged beyond $3,500 per ounce and climbed to $3,600 per ounce soon after disappointing U.S. jobs data for August fueled speculation regarding more accommodating monetary policies. BofA is optimistic, forecasting the average quarterly price of gold to reach $4,000 per ounce by the second quarter of 2026, with current spot prices reflecting a 4.1% increase week-over-week, positioned at $3,589 per ounce.
Investment experts like Rob Haworth from U.S. Bank Wealth Management highlight that while gold may be a viable investment opportunity for certain portfolios, its liquidity remains a concern. Haworth noted that you cannot use gold directly for everyday transactions, emphasizing that the recent price increase has primarily been driven by central bank purchases amid a weakening U.S. dollar, alongside nations like China seeking alternatives.
BofA cautions that context is crucial when assessing gold’s record high. Although the global gold sector’s market capitalization has surged to just over $550 billion, nearly double the peaks observed in 2011 and 2020, its percentage relative to the total global equity market tells a different story. Currently, gold constitutes 0.39% of global market capitalization, equivalent to the peak reached in 2020 but significantly lower than the 0.71% recorded in 2011. A return to such heights could imply a market cap nearing $990 billion, contingent on the cycle sustaining its momentum.
Despite elevated prices, gold equities continue to trade below historical peak valuations. The next-12-month (NTM) EV/EBITDA multiple for the sector stands at 11x, notably less than the 15.4x recorded in 2020. The current price-to-net-asset-value (P/NAV) ratio is 1.88x, below the 2020 value of 2.27x and the 2.19x peak from 2011. When adjusted to reflect current gold prices, these multiples suggest room for potential growth, with NTM EV/EBITDA rising to 11.7x and P/NAV to 1.39x.
The performance of gold equities has been varied, with major indices such as the S&P/TSX Global Gold Index, Philadelphia Gold and Silver Index, and NYSE Arca Gold Bugs Index all responding positively to gold’s price surge. Fresnillo stands out as the top performer in 2025, skyrocketing over 268%, underscoring the disparate results emerging within the sector.
BofA’s research highlights potential for further growth, contingent on prevailing trends in monetary policy, inflation, and overall investor sentiment. Nonetheless, the gold sector remains a relatively small fraction of the global equity market, and current valuations are still below historical peaks. For market analysts and investors, while the rising price of gold is indeed noteworthy, understanding the fundamental aspects suggests that this current boom may not replicate past highs, necessitating a more nuanced view of these so-called “record highs.”
