Bank of America predicts: Gold price to break $3500 requires two driving factors.

The price of gold has surpassed $3,000, prompting the second largest bank in the United States, Bank of America (referred to as BofA), to raise its gold price targets for this year and next. BofA stated that if the demand from central banks and China increases, the price of gold could exceed $3,500.

In a report released on Wednesday (March 26), Bank of America stated that it predicts the price of gold to reach $3,063 per ounce in 2025 and $3,350 per ounce in 2026. These new forecasts are higher than BofA’s earlier predictions of $2,750 per ounce in 2025 and $2,625 per ounce in 2026.

The current spot price of gold is around $3,024 per ounce, marking an increase of over 15% so far this year. The record-breaking rise in gold prices this year has been driven by economic and geopolitical concerns sparked by U.S. trade policies.

Bank of America also highlighted the uncertainty caused by U.S. trade policies, which is expected to continue providing support for gold prices in the short term.

In the report, BofA reiterated that if gold investment demand increases by 10%, the spot price of gold could climb to $3,500 within the next two years.

“This figure of $3,500 per ounce is significant, but not impossible,” analysts at BofA stated in the report. “Where could the demand come from? The insurance industry in China alone investing 1% of its assets in gold would account for around 6% of the annual gold market. Central banks currently hold about 10% of gold reserves and could potentially increase this to 30% to enhance the efficiency of their investment portfolios. Furthermore, retail investors have been steadily increasing their investments in gold, with physical-backed ETF assets under management in the Americas, Europe, and Asia growing by 4% year-to-date.”

Not only has the price of gold exceeded $3,000, but the increase in economic uncertainty and a pullback in the U.S. stock market are driving retail investors back to the gold market. Bank of America noted that year-to-date, demand for gold-backed exchange-traded funds has increased by 4%.

“Compared to the lack of interest in these investment tools in recent years, this is a significant change. However, the inflow of funds has not yet reached the total investment demand growth target of 10% needed for gold to reach $3,500 per ounce,” analysts stated.

Central bank demand for gold is a key factor in gold reaching $3,000. Global reserves have significantly increased over the past three years, but Bank of America believes that reserves still need to increase further.

“Viewing gold as an effective diversification tool for investment portfolios, the allocation of gold in central bank foreign exchange reserves has risen from 5.5% in 2000 to 11%, indicating significant progress in gold investments,” analysts stated. “Nevertheless, central banks can further diversify.”

Bank of America stated that a 30% allocation of gold in the average central bank investment portfolio would be most effective.

However, Bank of America added that risks to the rise in gold prices include U.S. fiscal consolidation, easing geopolitical tensions, and improved cooperation in inter-governmental relations, including more targeted tariffs on April 2.

Currently, the market is closely watching for potential retaliatory tariff measures that the Trump administration may take on April 2.