International gold prices may go up by over 16 pc in next 18 months: BofA

The report suggested that even a small rise in investment demand could have a significant impact on gold prices this year. If investment demand increases by just 1 per cent, gold could average USD 3,000 per ounce in 2025.

It said, "Gold could potentially reach USD3,500/oz over the coming 18 months, if non-commercial purchases increase by 10 per cent."

However, for it to reach USD 3,500 per ounce, investment demand needs to grow by 10 per cent, which, while challenging, is not impossible.

The report highlighted several factors that could drive this demand. One key contributor is China's insurance industry, which can invest up to 1 percent of its assets in gold. This amount would be equivalent to nearly 6 percent of the total annual gold market.

Additionally, central banks around the world, which currently hold about 10 per cent of their reserves in gold, could increase their gold holdings to over 30 per cent to make their portfolios more efficient. If central banks pursue such a strategy, it could significantly boost demand for the precious metal.

The report also added that retail investors are also playing a role in driving gold demand. Assets under management in physically backed gold exchange-traded funds (ETFs) have risen by 4 per cent year-on-year across the Americas, Europe, and Asia.

This suggests that more individual investors are increasing their exposure to gold, likely due to economic uncertainties and market volatility.

Another key factor supporting gold prices mentioned in the report is the uncertainty surrounding U.S. trade policies under the Trump administration. The report notes that concerns over trade policies could lead to a weaker U.S. dollar, which would further push gold prices higher in the near term.

Additionally, the broader rebalancing of America's twin deficits--fiscal and trade--could create conditions that favour gold as a safe-haven asset.

BofA Global Research also examined the fundamental factors influencing gold prices, including mine production, scrap supply, jewellery demand, and investor purchases.

Since scrap and jewellery demand often fluctuates with prices, it is difficult to predict the exact market balance without considering a specific price level.

However, the report suggested that if investment demand continues to rise, gold prices could remain strong in the coming months.