This assessment was made as investors continue to worry about the growing US government budget deficit.
" marking concerns about financial sustainability are unlikely to ease, regardless of the outcome of Senate negotiations. Interest rate fluctuations and a weaker US dollar will help gold, especially if the US Treasury Department or the US Federal Reserve (FED) finally intervene to support the market.
Therefore, while war and conflict are often not a long-term driver, we see a path for gold to increase to $4,000/ounce in the next 12 months," the analysts said in the report.
According to the Bank of America Fund Management Survey recently, 41% of participants said that investing in gold (buying gold in the hope of increasing prices) is the most popular choice in the market in the past three months.
Meanwhile, 20% of fund managers see short-term investment in the US dollar as a popular third-place transaction in global markets.
Although gold has been considered a crowded transaction in the past three months, gold is not always in the spotlight of investors. Up to 54% of survey participants believe that international stocks will be the most efficient asset during this period.
The cautious sentiment towards gold comes as investors' confidence in a wider market is improving. Fund managers are reducing their cash holdings and seeing lower recession risks.
The survey found that investor sentiment has risen to a three-month high as concerns about recession have eased sharply. Only 36% of participants see the US economy falling into recession, down from 44% in April. At the same time, 66% predicted a smooth landing, while 13% predicted a strong landing and 16% (a high in eight months) said there were no landing.
Despite the risk of short-term speculation, the survey highlights some long-term positive trends for gold. Among participants, 59% do not expect the US government funding bill, including new tax cuts to boost economic activity in the second half of the year, to be approved. However, 81% expect the government budget deficit to increase.
Analysts note that gold prices are still well supported, as rising public debt increases inflationary pressures and weakens the value of the USD.
While the USD index is undervalue - trading near a three-year low, many commodity analysts believe that gold has nothing to worry about due to the new upward momentum of the USD. The negative correlation between gold and the US dollar has weakened in recent years, as many countries have diversified away from the US dollar and into gold.
