Gold will be the primary hedge and performance driver in 2026, silver could top out between $135 and $309 – Bank of America’s Widmer

“Gold continues to stand out as a hedge and alpha source,” Widmer said in a Monday report. Bank of America sees tightening market conditions and strong earnings sensitivity position gold as a key hedge and potential return driver in 2026.

BofA’s 2026 outlook is based on their projections of falling supply and rising costs in the gold sector. Widmer expects the 13 major North American gold miners to produce 19.2 million ounces this year, a decline of 2% from 2025, adding that most market forecasts for output are too optimistic.

Widmer projects average all-in sustaining costs will rise 3% to about $1,600 per ounce, a level slightly above the market consensus.

He also expects a strong increase in profitability for the producers, with total EBITDA projected to rise 41% to around $65 billion in 2026.

BofA expects gold to average $4,538 per ounce in real terms over 2026, while silver, platinum, and palladium are also expected to see higher prices, reflecting the bank’s positive outlook for precious metals as a whole.

Widmer said silver may appeal more to investors willing to take higher risk for extra upside, and noted that the current gold:silver ratio of around 59 suggests silver could still outperform gold. He cited the historical ratio low of 32 in 2011 as implying a silver price high of $135, while the 1980 low of 14 in the ratio suggests a silver price of $309 per ounce.

In his annual outlook webinar in December, Widmer said that gold bull rallies typically peak only when the underlying drivers that initially triggered the rally fade, and don’t end simply because prices rise.

“I’ve highlighted before that the gold market has been very overbought. But it's actually still underinvested,” he said. “There is still a lot of room for gold as a diversification tool in portfolios.”

Widmer added that he doesn’t see the bullish environment ending anytime soon. BoA expects gold prices to push to $5,000 an ounce in 2026.

He noted that it would take only a 14% increase in investment demand to reach that target. Investment demand has roughly averaged that level over the last couple of quarters. Meanwhile, it would take a 55% increase in investment demand to drive gold prices to $8,000 an ounce next year.

Investment demand—particularly among retail investors—has surged in recent months, with year-to-date inflows into gold-backed exchange-traded funds reaching their highest level since 2020. However, Widmer said there is still a key segment that has largely ignored the gold market, and that could change in the new year.

Widmer noted that the precious metal now represents about 4% of the total financial market, but within the professional investment sector, high-net-worth investors hold only 0.5% of their assets in gold.

Growing interest in gold comes as many investors continue to question the reliability of the traditional 60/40 portfolio allocation. Widmer said research now shows that holding 20% of a portfolio in gold can be an effective strategy.

“When you run the analysis since 2020, you can actually justify that retail investors should have a gold share of well above 20%,” he said. “You can even justify 30% at the moment.”

But it's not just retail investors who stand to benefit from further diversification into gold. Widmer said he expects central banks to continue buying gold even as official reserves hit milestone levels in 2025.

He noted that central bank gold reserves have surpassed their holdings of U.S. Treasuries. Gold now represents, on average, about 15% of total central bank reserves. However, his modeling indicates that reserves would be fully optimized with an average gold allocation of around 30%.

“Whichever portfolio you're looking at, whether it's a central bank portfolio or an institutional portfolio, they can benefit from diversification into gold,” he said.

Widmer added that gold’s massive price gain in 2025 means it will be difficult for some portfolio managers to ignore in the new year.

“Just looking at benchmarks, gold has been one of the best-performing assets for the past few years,” he said. “What we've heard a lot of the time is that ‘gold is a non-yielding asset; it costs to hold it; you don't make any money from it, so what's the point of actually holding it?’ But  just from a pure direction perspective, gold could have actually made a good contribution to a portfolio. I think the numbers speak for themselves.”

As for what could ignite another rotation into gold, Widmer said U.S. monetary policy will be an important factor in 2026. He noted that his modeling suggests that during an easing cycle—when inflation is above 2%—gold prices have risen by 13% on average.

“You don’t even need to see cuts at every meeting,” he said. “You just need to see that rates are going down.”