BofA says buy gold stocks as valuations cheap amid macro tension

Bank of America analysts recommend buying gold stocks, arguing that valuations are cheap amid macro tension and that share prices are pricing in gold well below current spot levels.

Gold equities are attractively valued even as bullion faces near-term headwinds from a hawkish Federal Reserve and a stronger dollar, according to a note from BofA. 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.

For gold and precious metals traders, the BofA analysis highlights a potential disconnect between gold stocks and the underlying metal. If gold prices stabilize or rebound, gold equities could see significant upside as they currently discount a lower gold price. Traders can monitor these moves on NowPrice's live gold dashboard to track spot prices and equity valuations in real time. The hawkish Fed stance and a stronger dollar remain key headwinds, but BofA's view suggests that the worst may be priced in for gold stocks.

Looking ahead, traders should watch for further Fed commentary, particularly any hints on the pace of future rate hikes. The U.S.-Iran situation also remains a wildcard; any escalation could boost gold as a safe haven, while a de-escalation could add pressure. Key data releases, such as U.S. jobs and inflation reports, will also influence Fed expectations and the dollar, driving gold and gold stock movements.