Key Takeaways:
Fair value snapshot: $4,700/oz year-end fair value vs $4,600/oz Q4'26 forecast | $3,900/oz estimated correction bottom vs $3,700/oz regression-implied
Deutsche Bank Research sees gold fair value near $4,700/oz by year-end, maintaining its $4,600/oz Q4 2026 forecast as the metal's explosive price phase since August 2024 continues.
"The current episode is only one of five appearing in data from 1975," Michael Hsueh and Bryant Xu, analysts at Deutsche Bank Research, said in a note dated Aug. 3.
The analysts flagged downside signals from long-term gold-to-commodity ratios, which adjusted for growth imply gold at $2,600/oz. Regression evidence, however, suggests gold may have bottomed around $3,900/oz rather than extending toward the regression-implied $3,700/oz.
Gold traded below $4,100 heading into the European session, according to FXStreet data. The next catalyst is the US ISM Manufacturing PMI release, with markets also monitoring US-Iran negotiations.
Explosive dynamics since August 2024
"A statistical measure indicates that the current episode of explosive gold price behaviour began from August 2024 and is ongoing," the analysts wrote. "This provides a useful frame of reference for today's gold market."
The episode is one of only five explosive phases appearing in data since 1975, after filtering out isolated one-month readings as noise and aggregating temporally linked observations.
The analysts acknowledged that adjusted gold-to-commodity relative price ratios, indexed to a 1986 reference point, imply downside for gold to $2,600/oz. However, they noted that regressing gold prices on the BSADF test statistic indicates both gold's upward extension and downward correction are muted in this episode.
"Rolling back our model adjustments for excess official demand and real rate convexity, we would still see gold fair value as likely to register around $4,700/oz by year-end, above our $4,600/oz forecast for Q4'26," they said.
The analysts said they discount the substantial downside implied by commodity ratios and overweight the fair value model, which aligns with gold's demonstrated sensitivities to financial market variables and Deutsche Bank's cross-asset views.
Gold's range play below $4,100 has been capped by a modest US Dollar recovery from its lowest level since June 17, though renewed hopes for a US-Iran peace deal and receding Fed rate-hike expectations limit the dollar's upside, according to FXStreet data.
The Deutsche Bank call comes as gold continues to draw institutional interest as a hedge against geopolitical risk and currency debasement. A major bank's endorsement of the fair value model could support further inflows into gold-backed exchange-traded funds and mining equities, with the metal's explosive phase showing no signs of abating through the third quarter.
This article is for informational purposes only and does not constitute investment advice.
