Gold set for new highs, could hit $5,000 next year
What's the story
Gold prices continued their historic rally on Tuesday, hitting around $4,175 per ounce. The surge is largely driven by expectations of a US Federal Reserve rate cut in December. Bank of America (BofA) has now predicted that gold could average $4,538 per ounce in 2026 and possibly reach as high as $5,000 due to ongoing macroeconomic uncertainties.
Market trends
Global gold rates continue to rise
Globally, gold prices continued their strong performance from Monday, after a nearly 2% jump in the previous session. Spot prices hovered around $4,175 per ounce, further extending record highs amid weaker yields and macroeconomic uncertainty. Back home on the Multi Commodity Exchange (MCX), early trade saw gold rising over 1%, mirroring global gains as investors positioned themselves ahead of a potential shift in US monetary policy.
Policy implications
Fed officials hint at potential rate cut
Expectations of a December rate cut have surged after New York Fed President John Williams hinted at the possibility of easing policy soon. He said cutting interest rates "won't hurt the Fed's fight against inflation" and would support broader economic stability. His comments have increased market confidence that the rate-hike cycle may be over, with traders now assigning an 81% probability to a Fed rate cut in December.
Price surge
Gold's remarkable upward trajectory continues
Gold has been on a remarkable upward trajectory this year, breaking the $4,000 per ounce mark for the first time in history. The rally has been fueled by global economic uncertainty, geopolitical tensions, persistent inflation, and a weakening US dollar. On October 7, 2025, gold futures hit an intraday high of $4,014.60 per ounce and have since climbed further to new highs above $4,175.
Future projections
BofA's forecast for gold prices in 2026
BofA expects the momentum in gold to continue into 2026, projecting an average price of $4,538 per ounce next year. The firm believes gold still has further room to run despite being described as both "overbought" and "underinvested." BofA now sees a realistic pathway for gold to reach $5,000 per ounce in 2026 if key macro forces remain supportive such as elevated government debt levels and persistent inflation.