Gold Set For Stellar Run In As Investors Seek Safe Havens, Stronger Returns

(MENAFN- Khaleej Times)

Gold is poised to remain a cornerstone of investment portfolios in 2026, with analysts projecting the yellow metal to average $4,538 per ounce next year and bullish scenarios pointing toward $5,000 an ounce, underscoring its enduring appeal as a hedge against uncertainty and a key driver of returns.

In a widely followed annual outlook, Michael Widmer, head of Metals Research at Bank of America (BofA), highlighted that tightening market conditions and persistent demand are positioning gold as a“hedge and alpha source” for investors navigating a complex macroeconomic backdrop. His firm's forecast rests on a mix of supply constraints, rising production costs and robust earnings outlooks for the world's leading gold miners.

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Widmer's projections reflect a cautious view on supply. He expects the 13 major North American gold producers to deliver 19.2 million ounces in 2026, a 2 per cent decline from 2025. He also anticipates total all-in sustaining costs-the industry's broad measure of production expense-will climb 3 per cent to about $1,600 per ounce, slightly above consensus expectations, potentially eroding future supply growth.

At the same time, profitability among gold producers is expected to strengthen markedly. BofA forecasts total Ebitda (earnings before interest, tax, depreciation and amortisation) across the sector to rise 41 per cent to approximately $65 billion in 2026, a reflection of rising prices and operational leverage.

While gold dominates the spotlight, the broader precious metals complex is also expected to benefit.

Widmer highlighted silver, platinum and palladium as poised for higher prices, with silver drawing particular interest from investors willing to accept higher risk for the prospect of outsized gains. The current gold:silver ratio of around 59-a measure of how many ounces of silver it takes to buy one ounce of gold-suggests there may be room for silver to outperform, especially when compared with historical lows of 32 in 2011 and 14 in 1980, which imply potential silver peaks in the $135 to $309 an ounce range.

He emphasised that gold bull markets typically persist until the very conditions that sparked the rally fundamentally change, not simply because prices have risen.“The gold market has been very overbought. But it's actually still underinvested,” he told clients, highlighting that gold remains underrepresented in many institutional portfolios.

Indeed, gold's share of the total financial market stands at about 4 per cent, yet among high-net-worth professional investors it accounts for only 0.5 per cent of assets. Widmer said this divergence may encourage fresh inflows in 2026, especially as more investors question the traditional 60/40 stock-bond allocation and seek diversification through non-correlated assets.

Retail interest in gold-backed exchange-traded funds (ETFs) has surged recently, with year-to-date inflows in 2025 reaching their highest levels since 2020, according to industry trackers. This underscores growing appetite among individual investors for the metal as both a diversifier and return driver.

Analysts cited research indicating that a 20 per cent allocation to gold in a balanced portfolio can significantly enhance risk-adjusted returns, and even suggests that a 30 per cent weighting could be justified under current market conditions.“When you run the analysis since 2020, you can actually justify that retail investors should have a gold share well above 20 per cent,” they said.

It's not just individuals who could benefit from increased exposure. Widmer expects central banks to remain active buyers of gold even as official reserves reached milestone levels in 2025, with total gold holdings already surpassing central banks' US Treasury allocations. On average, gold represents about 15 per cent of central bank reserves, but precious metal analysts' modelling suggests that an optimal allocation would sit nearer 30 per cent, offering further prospects for institutional demand.

Widmer's outlook also points to potential catalysts for another rotation into gold.

One key factor in 2026 could be shifts in US monetary policy. His analysis shows that during easing cycles-when inflation is above 2 per cent-gold prices have historically risen by about 13 per cent.“You don't even need to see cuts at every meeting,” he noted.“You just need to see that rates are going down.”

Gold's strong performance in recent years has made it difficult for some portfolio managers to ignore.“Gold has been one of the best-performing assets over the past few years,” he said.“Traditional concerns about its non-yielding nature are giving way to recognition of its contribution to portfolio returns.”

Analysts believe that in 2026 the gold market appears positioned to build on recent gains, driven by constrained supply, rising costs, deepening investor engagement and sustained central bank interest. That combination, they say, could keep the precious metal at the forefront of wealth preservation strategies and risk-managed return profiles in an increasingly volatile global economy.

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