Investing.com — Gold equities are attractively valued even as bullion faces near-term headwinds from a hawkish Federal Reserve and a stronger dollar, Bank of America analysts say, arguing that share prices are pricing in gold well below current spot levels.
Gold has pulled back around 17% since the start of the Iran conflict, settling at $4,156 an ounce by Friday after a brief rebound on news of a U.S.-Iran memorandum of understanding failed to hold.
The Fed’s decision on June 17 to hold rates at 3.50-3.75% while signaling the possibility of future hikes under new Chair Kevin Warsh pushed yields and the dollar higher, adding further pressure on the metal.
BofA analysts note that “the shift away from inflationary cuts toward tighter policy is a headwind for gold,” though they argue that persistent U.S. budget deficits and de-dollarization support the longer-term case.
Against that backdrop, gold stocks have become cheap relative to the metal itself, the analysts said. Using a price-to-net asset value (P/NAV) approach, BofA found that companies in its coverage are on average pricing gold at $3,354 per ounce, marking a 19% discount to spot.
Wheaton Precious Metals implied the highest gold price in the group at $4,395 per ounce, while Franco-Nevada implied the lowest at $2,416, weighed down by its oil and gas exposure and the market discounting Cobre Panama contributions.
On an EV/EBITDA basis, BofA’s coverage universe implied an average gold price of $4,016 per ounce, a smaller 3% discount to spot.
Another supporting factor is strong central bank (CB) demand. The World Gold Council’s 2026 Central Bank Gold Reserves Survey, published last week, found that 89% of 76 central bank respondents expect global official gold reserves to increase over the next 12 months, with 45% planning to add to their own holdings, up from 43% in the 2025 survey.
Emerging market and developing economy central banks showed stronger appetite than advanced economy peers, with 53% planning additions versus 18%.
“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.
On a stock-specific basis, BofA cut its price target on Alamos Gold to $50/C$68.50 from $57/C$78.50 after the company lowered its second-quarter production guidance by 12% following seismic damage at its Young-Davidson mine in Canada.
The bank nonetheless retained its Buy rating, calling the 18.4% share price decline on Friday excessive given that Young-Davidson accounts for only 17% of its net asset value estimate, and pointing to volume growth potential from the Island Gold and Lynn Lake projects.
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