Gold could rally to $4,000 as upside looks stronger than correction risk: Deutsche Bank
“With gold having reached our 2026 forecast (USD 3,700/oz), we believe that the FX and rates environment remains conducive to further upside, while positioning indicators are not stretched,” Deutsche Bank said in its note.
The report adds that although gold has been screened as rich versus fair value, Deutsche Bank thinks much of this is due to the strength of official demand, which it expects to persist. The bank also stated, “We show fair value adjusted by excess official demand as an overlay… We expect that gold’s premium to these models will persist.”
The bank has raised its gold and silver forecasts for next year, saying, “We raise gold and silver forecasts for next year to USD 4,000/oz average and USD 45/oz (from USD 3,700/oz and USD 40/oz).”
It also noted that its strategy gain based on December 2025 gold futures adjusted for carry had already delivered a return of 9.5% since its FX Blueprint call in May.
The note outlines several macroeconomic drivers underpinning its bullish view, including expectations of a resumed Fed easing cycle, ongoing uncertainty around the Fed’s independence and FOMC composition, and the potential for a weaker US dollar.“Our preference for USD downside as it loses its status as a G10 high-yielder and reflecting foreigners’ newfound inclination to invest in US assets on a currency hedged basis… Historically, the broad USD is the strongest determinant of gold performance,” Deutsche Bank explained.Supply factors are also lending support, with the bank observing that “recycled gold supply [is] running below (4%) of what we would expect this year,” which it said “dampens a structural restraint on gold upside.”
While maintaining a bullish stance, Deutsche Bank also flagged some potential headwinds for gold. These include strong equity market performance, which may divert flows away from safe-haven assets, and improving macro indicators in the US.
“Strong equity performance buttressed by a favourable macro and earnings backdrop, subdued discretionary positioning, and low investor sentiment… lifting our year-end S&P target to 7,000,” the report said.
On the policy front, the bank noted that its US economics team’s base case is that “the Fed will not cut rates further in 2026, given that our inflation and labor market forecasts are inconsistent with rates below neutral.”
Additionally, seasonal factors could weigh on gold. “The fourth quarter tends to be the weakest for gold on 10y and 20y lookbacks,” Deutsche Bank reminded.
Despite these risks, the tone of the report remains optimistic, with the bank stating that “further upside is more likely than a correction down to financial fair value.” With a projected target of USD 4,000/oz, investors may continue to see gold as a preferred asset class heading into 2026, particularly if official demand remains strong and the USD weakens further.
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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
represent the views of The Economic Times)