• Gold equities are pricing in bullion at around $3,354/oz, a roughly 19% discount to spot, according to Bank of America.
  • A stronger dollar and hawkish Fed pose near-term headwinds, but long-term support from fiscal deficits, de-dollarization, and central bank buying remains intact.
  • BofA maintains a constructive outlook, citing significant upside in select miners despite near-term volatility.

Gold stocks are offering a rare bargain as they trade at a steep discount to the underlying metal, according to Bank of America. The bank said in a note Tuesday that gold equities are pricing bullion at roughly $3,354 per ounce, about 19% below current spot levels near $4,140. “We see gold stocks as attractively valued despite the near-term headwinds of a stronger dollar and a hawkish Fed,” the analysts wrote.

The discount reflects market jitters over a resurgent dollar and expectations that the Federal Reserve will hold rates higher for longer. Spot gold has pulled back from recent highs as the greenback strengthens, but BofA argues the sell-off in miners has been overdone. Longer-term drivers remain supportive: rising fiscal deficits in major economies, a gradual shift away from dollar reserves, and persistent buying by emerging-market central banks.

Central bank gold purchases have been a key pillar of demand, with EM institutions continuing to diversify reserves. “Central banks are still accumulating gold at a record pace, and that trend is unlikely to reverse soon,” the note said, citing official sector data. This demand provides a floor for prices and underpins the case for gold equities, which offer leveraged exposure to any upside in bullion.

BofA highlighted select miners with strong cost controls and robust resource bases as potential outperformers. “Near-term volatility may continue, but we see substantial upside in names that can deliver production growth and manage costs,” the analysts said. They cautioned that not all miners are equal; those with high all-in sustaining costs could face margin pressure if the dollar remains strong.

Investors have been wary of gold stocks amid the macro headwinds, but BofA’s analysis suggests the market is pricing in excessive pessimism. If gold holds above $3,500 or resumes its uptrend, miners could see a sharp re-rating. The bank’s constructive stance aligns with longer-term structural themes that favor gold as a hedge against currency debasement and geopolitical risk.

A spokesperson for BofA declined to comment beyond the note. As of midday trading, the NYSE Arca Gold Miners Index was down 0.3%.