Banking giant Wells Fargo believes that gold can hit new highs by the end of the year, despite multiple headwinds limiting price discovery.
In its latest Investment Strategy report, Wells Fargo says gold and other metals have been on a decline since tensions in the Middle East erupted.
According to the bank, gold is widely considered a safe-haven asset, but a bullish US dollar and other macro factors are draining gold’s strength.
“While we do still have a favorable outlook for Precious Metals in 2026, there are other factors at play that will need to be resolved before gold takes its next leg higher. Namely, a strengthening US dollar has been a headwind for gold as a stronger dollar makes gold more expensive for purchasers outside the US — who account for roughly 90% of physical consumer demand. At the same time, higher oil prices are re-igniting concerns of higher inflation, Fed rate cuts have been priced out, and the fiscal deficit is rising amid the war.
As a result, real rates are rising, which is typically a headwind for gold prices. This combination of a strengthening US dollar, potentially fewer rate cuts, and higher real yields has been a potent headwind for precious metals. As in effect, the stronger dollar makes gold relatively more expensive for the bulk of purchasers, while the rise in real yields makes gold less attractive compared against interest-bearing assets.”
Despite the headwinds, Wells Fargo is optimistic that hostilities in the Middle East will not last long, giving long-term investors opportunities to accumulate gold well below its peak of $5,602 per troy ounce.
“That said, we still favor Precious Metals and have a 2026 year-end gold target of $6,100 – $6,300 per troy ounce. Our bias is that the Middle East conflict will be short-lived, and that oil prices will drift lower through year end. This should help tame concerns over inflation, and help moderate Treasury yields. Additionally, while central bank demand has eased, purchasing activity remains well above the long-term average and will continue to be a key tailwind for global demand growth.
Therefore, we view gold’s underperformance as a potential opportunity to dollar-cost average, and recommend that within Commodities investors begin looking to rotate exposure from Energy to one of our favored asset groups — Precious Metals and Industrial Metals.”
Recently, JPMorgan Chase revealed its year-end target for gold at $6,300 per ounce. And “Bond King” Jeffrey Gundlach told investors to add to their gold holdings as the precious metal trades at around $4,000.
At time of writing, gold is trading at $4,442.
Disclaimer: Opinions expressed at CapitalAI Daily are not investment advice. Investors should do their own due diligence before making any decisions involving securities, cryptocurrencies, or digital assets. Your transfers and trades are at your own risk, and any losses you may incur are your responsibility. CapitalAI Daily does not recommend the buying or selling of any assets, nor is CapitalAI Daily an investment advisor. See our Editorial Standards and Terms of Use.