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

By Jules Rimmer

There are good reasons to suspect the gold price has bottomed for 2026, analyst says

Gold began a phase of "explosive price behavior" in August 2024 and it hasn't ended yet.

That's the view put forwarded by Deutsche Bank strategist Michael Hseuh, who reiterated the bank's year-end call for gold to reach $4,600.

Gold (GC00) on Monday was trading at $4,117.80, down 5% on the year but up 20% from 52 weeks ago.

A period of price behavior is considered "explosive" if an asset surges exponentially from its historical norms, says Hseuh. Given gold more than doubled in the last couple of years, it seems reasonable to describe its price action this way. The Bank of International Settlements described "bubble conditions" in the gold market as far back as August 2024.

Hsueh's special report on gold (GC00) examined the "explosive price behavior phase" from three angles.

First, he compared gold to. the long-term inflation-adjusted growth rate of other major commodities - copper, oil, and unusually, bread. Those rates range from 0.26% per year, for bread, to 3.44%, for oil. Applying those averages to gold implied a gold price of just $2,600 an ounce.

But he then used an econometric tool used to identify and time-stamp speculative price bubbles, called the Backward Supremum Augmented Dickey-Fuller test. Using that method, gold should have peaked at $6,400 and bottomed at $3,700, he finds.

Third, Hsueh's model tells him gold's fair value should be $4,700 by year end. That fair value, which uses factors including the S&P 500, the 10-year yield and exchange rates as inputs, was actually adjusted downward given slowing rates of official - i.e., central bank - purchases. Given the proximity to Hsueh's previous $4,600 target, he's sticking with his prediction for now.

Gold real rates of return

One fundamental observation Hsueh is keen to emphasize is that going back to 1957 and continuing to 2023, over that long time frame, gold has outperformed the U.S. consumer price index. The real return in that era was 2.5% on average and, of course, it would be considerably higher if gold's recent boom phase since 2024 was incorporated.

-Jules Rimmer

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08-03-26 0836ET