Updates to add details and context, adds file photos

June 13 (Reuters) - Bank of America sees a path for gold to rally to $4,000 per ounce over the next 12 months, noting that the deficit, interest rates, and the U.S. dollar will be key factors.

Market concerns over fiscal sustainability are unlikely to fade no matter the result of Senate negotiations, said the bank in a note on Friday.

"Rates volatility and a weaker U.S. dollar should then keep gold supported, especially if the U.S. Treasury or the Federal Reserve are ultimately forced to step in and support markets," it added. USD/

In May, Moody's said successive administrations have failed to reverse the trend of higher fiscal deficits and interest costs, and it did not believe that material reductions in deficits will result from fiscal proposals under consideration.

Gold is a preferred hedge against economic and geopolitical uncertainties. Spot gold was up 1.7% at $3,442 per ounce at 1343 GMT, coming within striking distance of its record high of $3,500.05 set in April. GOL/

The latest surge in gold prices is fueled by safe-haven demand after Israel launched a barrage of strikes across Iran on Friday, saying it had attacked nuclear facilities and missile factories and killed a swathe of military commanders.

Meanwhile, Goldman Sachs maintained its forecast that structurally strong central bank buying will raise the gold price to $3,700/toz by end-2025 and $4,000 by mid-2026.

(Reporting by Ashitha Shivaprasad in BengaluruEditing by Nick Zieminski)

((Ashitha.Shivaprasad@thomsonreuters.com;))