Gold is still in its ‘explosive phase,’ says Deutsche Bank, as it sticks to year-end target

Deutsche Bank analysts Michael Hsueh and Bryant Xu assert that gold has experienced a period of rapid price increase since August 2024, but signs suggest a relatively mild correction in recent times. They point to downward trends in long-term gold-to-commodity ratios as a downside signal, yet suggest that a modest decline in price is possible, with a fair value estimate placing gold around $4,700 per ounce by the end of the year, slightly above their December 2026 forecast of $4,600 per ounce.

A statistical measure confirms that the current surge in gold prices began in August 2024 and continues to this day, marking one of only five such episodes in data from 1975. To evaluate gold's current price, the analysts adjust gold-to-commodity ratios for long-term growth rates, indicating a downside potential for gold to reach $2,600 per ounce.

They also analyze the regression of gold prices using the BSADF test statistic, suggesting that both the upward trend and potential downward correction in this episode are limited. By revisiting their model adjustments for excess official demand and real rate convexity, the analysts estimate that gold's fair value could be around $4,700 per ounce by the end of the year, surpassing their Q4 2026 forecast of $4,600 per ounce.

Based on these factors, the analysts believe it is prudent to maintain their previous forecasts while taking into account the substantial downside indicated by commodity ratios and the fair value model, which aligns with gold's responsiveness to financial market variables and cross-asset views from Deutsche Bank research.