Gold Faces Headwinds from Fed Policy and Stronger Dollar
Bank of America believes gold mining stocks remain attractively priced, even as gold itself contends with short-term challenges stemming from tighter U.S. monetary policy and a firmer dollar.
The bank noted that many gold equities are currently valued as if the metal were trading significantly below prevailing spot prices, creating what it sees as a compelling opportunity for investors.
Gold prices have retreated roughly 17% since the outbreak of the Iran conflict, ending Friday at $4,156 per ounce. A brief rally following news of a U.S.-Iran memorandum of understanding ultimately faded as investor optimism cooled.
Additional pressure came after the Federal Reserve left interest rates unchanged at 3.50%-3.75% on June 17 while indicating that further rate increases remain possible under Chair Kevin Warsh. The outlook pushed Treasury yields and the U.S. dollar higher, weighing on precious metals.
BofA analysts acknowledged that “the shift away from inflationary cuts toward tighter policy is a headwind for gold,” but argued that structural factors such as persistent fiscal deficits in the United States and ongoing de-dollarization trends continue to support the longer-term investment case.
Valuations Suggest Significant Upside
According to BofA, the disconnect between gold prices and gold-equity valuations has become increasingly pronounced.
Using a price-to-net-asset-value (P/NAV) methodology, the bank estimates that the companies under its coverage are valued as though gold were trading at an average of $3,354 per ounce, representing a 19% discount to current spot prices.
Among the companies analyzed, Wheaton Precious Metals implied the highest gold price assumption at $4,395 per ounce. Franco-Nevada reflected the lowest implied gold price at $2,416 per ounce, influenced by its exposure to oil and gas assets and the market’s treatment of contributions from Cobre Panama.
Using an EV/EBITDA framework, BofA calculated an average implied gold price of $4,016 per ounce across its coverage universe, equating to a narrower 3% discount to spot levels.
Central Banks Continue to Support Demand
The bank also highlighted ongoing central bank buying as a key pillar supporting the gold market.
The World Gold Council’s 2026 Central Bank Gold Reserves Survey found that 89% of surveyed central banks expect global official gold holdings to increase over the coming year.
Meanwhile, 45% indicated plans to increase their own reserves, compared with 43% in the previous survey.
Demand appears particularly strong among emerging-market and developing-economy central banks, where 53% expect to add to holdings versus 18% among advanced economies.
“The survey’s results support our constructive view on gold, and we expect CB purchases to continue to support gold prices in the near term,” BofA analysts wrote.
Alamos Gold Target Reduced but Buy Rating Maintained
On individual stocks, BofA lowered its price target for Alamos Gold (NYSE:AGI) to $50 (C$68.50) from $57 (C$78.50) after the miner reduced second-quarter production guidance by 12% due to seismic-related disruptions at its Young-Davidson operation in Canada.
Despite the revision, the bank maintained its Buy recommendation, arguing that Friday’s 18.4% share-price decline was excessive given that Young-Davidson represents only about 17% of its estimated net asset value.
BofA also pointed to future production growth opportunities from the Island Gold and Lynn Lake projects as supportive factors for the company’s longer-term outlook.