Wells Fargo is telling clients that gold’s long-term bull market is intact and predicts that the precious metal can return to $5,500 per ounce by year-end and top $6,000 in 2027.
In the aftermath of the cease-fire settlement between the U.S. and Iran, oil prices retreated from their wartime highs. Wells Fargo’s investment team says that will provide a boost to gold. “As energy and agriculture prices moderate, we see an improving backdrop for metals. Our precious metals outlook is driven by historically low inflation-adjusted yields, low enough to encourage investors to buy a non-yield asset such as gold,” the firm says in its Midyear Outlook.
While the bank expects bond yields to decline—making them less attractive relative to gold—Wells Fargo warns geopolitical risks remain ever-present. Moreover, a lack of fiscal discipline in major economies adds to Wells Fargo’s argument for gold.
“For gold to not do well, you would need countries around the world to rein in their deficits and defend price stability. The fact that policymakers will always take the easy way out, to me, is the case for gold,” said Sameer Samana, Head of Global Equities and Real Assets Strategy.
Central bank buying will provide further support to the gold price, the bank argues.
“We firmly believe that gold is that additional diversifier,” said Samana. “More and more in this highly uncertain world, central banks are looking around for something in addition to U.S. Treasuries and cash with respect to where to park their reserves.”
Wells Fargo says gold is one of the bank’s highest-conviction investment recommendations.
