Bank of America sees value in gold miners even after cutting 2026 gold price forecast
While gold prices could continue to struggle through the second half of the year as markets expect the Federal Reserve to raise interest rates, one bank still sees plenty of opportunity in precious metals, with particularly attractive value in the mining sector.
Commodity analysts at Bank of America have been curbing their enthusiasm for the gold market since late June, and last week they officially downgraded their 2026 average gold price forecast by 14% to US$4,360 an ounce.
However, the bank is not giving up on the precious metal, remaining bullish over the long term. Meanwhile, as gold prices consolidate, Bank of America's equity analysts see compelling value in mining stocks.
The shift in the bank's outlook comes as Bank of America expects the Federal Reserve to raise interest rates three times this year, even as inflation pressures ease. The analysts said that in this environment they expect to see a rotation away from overvalued equities and into previously overlooked sectors.
“Higher interest rates reduce the money supply, which means tighter financial conditions for businesses. All else being equal, it's a bearish sign for equities,” the analysts said in the report. “Higher rates, lower free cash flows, and record index concentration have sent investors into stocks that are smaller, less expensive, and less crowded. There is scope for more rotation: $21tn in US household cash is 33% over the pre-Covid trend, & cash with -1% after-tax real yield is no prize.”
While Bank of America sees several undervalued segments of the market, including fixed income, banks, and Latin American equities, the mining sector also ranks near the top of its list.
The analysts noted that gold miners have become one of the market's most profitable sectors as higher gold prices have pushed margins to record highs, allowing companies to strengthen their balance sheets.
“Gold miner free cash flow is 10x higher than it was in 2020, with half the long-term debt as a percentage of equity,” the analysts said. “Gold miner earnings yields are the highest of any sector at 12.0% and are at the least expensive relative to the S&P 500 in the last 20 years.”
At the same time, BofA said metals equities are trading at a 19% discount to their net asset values.
The analysts also noted that, like gold itself, mining equities can provide important portfolio diversification.
“Gold miners have low correlations to both equities & fixed income (0.3 & 0.2 over the last 10 years),” the analysts said.
