Picture someone shopping for a gold necklace as a birthday gift. The design looks familiar, but the price tag can make a thinner chain or smaller pendant suddenly appealing.
That same mindset is playing out beyond jewelry counters.
Gold has become expensive enough to discourage physical buyers, even as investors continue to hold it for protection against uncertainty.
Moreover, gold hasn’t been delivering the reassurance that people typically associate with a safe haven. Rising interest rates and a stronger dollar have helped weigh on prices despite geopolitical turmoil.
Now, Bank of America is warning about a divide. In an October 12 report shared with me, its analysts said buying from important sources of physical demand has weakened, while substantial holdings in gold funds could become a vulnerability if investors start selling.
Yet the bank is still forecasting higher prices next year.
That leaves an interesting question about what’s missing from gold’s rally. Are buyers willing to pay today’s prices, or are the economic conditions that would bring them back?
Bank of America warns gold buyers are pulling back despite record ETF holdings
Bank of America’s October 12 report points to an unusual split in the gold market.
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The bank identifies that investors continue to hold large positions in gold-backed funds, but several important sources of physical gold demand have weakened.
The bank listed gold at $4,176 an ounce in its forecast table and expects prices to average $4,000 during the fourth quarter. For perspective, according to Reuters, spot gold traded at $4,188.27 per ounce on October 13, 2026.
Its demand tracker explains some of the caution.
Purchases across the market participants it monitors were down 16.6% year over year in the latest reading. Indian gold imports fell 77.8%, while Chinese imports rose 39.3%. Central-bank purchases also increased in that comparison.
In other words, gold doesn’t have a universal buyer shortage. The buyers are behaving differently. Moreover, the contrast becomes sharper when you look at investment funds.
The World Gold Council reported that physically backed gold ETFs held a record 4,256 metric tons at the end of September, up 67 tons from the previous month. The funds attracted $10 billion in inflows in September, even as gold prices dropped.
Having plenty of gold already in a fund doesn’t guarantee investors will keep adding more.
BofA warns that substantial existing positions could amplify a selloff if fund investors turn into sellers. But its analysts also say they see no wholesale reassessment of gold.
So the bank’s effectively saying that buyers haven’t disappeared, but support is becoming uneven.
Understanding why starts with what physical gold costs shoppers and what higher interest rates offer investors instead.
Gold’s high prices are driving away jewelry buyers as rising rates hurt its appeal
Interestingly, the squeeze is showing up at jewelry counters.
Americans bought 25% less gold jewelry by weight in the second quarter than a year earlier, according to the World Gold Council.
However, that doesn’t exactly mean shoppers stopped wanting gold. Many are choosing lighter pieces or lower-carat designs to make their money go further.
Signet Jewelers CEO J.K. Symancyk described that pressure during the company’s September 9 earnings call.
When higher gold costs reach customers, he said retailers see “some resistance on units and a little bit of pullback,” particularly on lower-priced jewelry and gold weight.
The trend extends overseas.
The World Gold Council reported second-quarter jewelry-demand declines of 15% in India and 28% in China. Shoppers there have also turned to lighter designs and exchanges of old jewelry for new.
But gold hasn’t lost all its buyers.
U.S. demand for bars and coins rose 28% year over year in the second quarter, while global gold ETFs attracted fresh money in September.
People are changing how they buy gold, not necessarily giving it up.
Meanwhile, the wider economy is making gold a difficult safe haven. Bank of America says the Iran conflict has helped drive oil prices higher, raising inflation worries and expectations for Federal Reserve rate increases.
Higher Treasury yields offer investors income that gold cannot, while a stronger dollar makes the metal more expensive for buyers using other currencies.
The question now is what has to change before both shoppers and investors regain confidence.
Bank of America sees $5,000 gold next year, but the Fed holds a key
BofA isn’t calling for an immediate increase in gold prices.
Its October 12 forecast has the metal averaging $4,000 an ounce in the fourth quarter of 2026, then $4,750 in early 2027 and $5,000 in both the second and third quarters. Moreover, its 2027 average is $4,813, not a guaranteed year-end price.
For that recovery to make sense, the pressures hurting gold need to ease.
BofA points to calmer oil markets, reduced inflation anxiety, a Federal Reserve no longer leaning toward rate hikes, and a dollar that has stopped climbing. Lower inflation-adjusted bond yields would help, too.
There are reasons not to dismiss its optimism. Central bank surveys show an appetite for gold, ETF holdings remain substantial, and miners such as Newmont are generating strong cash flow.
But I wouldn’t treat those strengths as a floor beneath prices. Existing ETF holdings can turn into sales, and costly jewelry can keep shoppers away.
I would watch inflation releases, Fed guidance, ETF flows, and physical purchases. Gold’s buyer problem doesn’t mean its appeal has vanished.
The unanswered question is whether investors can support prices until traditional buyers return.
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