(Kitco News) - Gold’s biggest year-to-date rally since 1979 continues to surprise even the most bullish analysts, with another bank now forecasting $4,000 an ounce by next year.
After some modest consolidation last week, the gold market is once again seeing robust bullish momentum, pushing prices solidly above $3,700 an ounce. Spot gold last traded at $3,744.52 an ounce, up more than 1.6% on the day.
In his latest research note, Michael Hsueh, Research Analyst at Deutsche Bank, said he is raising his gold price forecast and expects prices to average $4,000 an ounce in 2026. The upgrade comes as gold has already hit the German bank’s 2025 price target of $3,700 an ounce.
He added that although gold prices have rallied more than 40% so far this year, the precious metal is still not overvalued.
“Although gold has screened as rich versus fair value, we think much of this is due to the strength of official demand, which we expect to persist,” he said.
“Perhaps the easiest way to understand our benchmarking for a USD 4,000/oz average gold price in 2026 is to examine the impact of official demand on an unadjusted gold model,” Hsueh said. “In annual growth terms, gold prices have outperformed the unadjusted model by an average of 13% since 2022, when official demand made its level-shift higher. Applying the same increment to our model’s 2026 expectation (11%+13% in 2026) arrives at a USD 4,000/oz average. This implicitly places a heavy weighting on the assumption that official demand continues to be strong.”
Looking at central bank demand, Hsueh said he expects official purchases to continue at double the pace of the 2011–2021 annual average of 400 tonnes, with Chinese demand dominating the marketplace.
At the same time, Deutsche Bank expects investment demand to remain a strong pillar of support.
“From a positioning standpoint, we point out that developed market ETFs are still 17 million troy ounces lower than the 2020 peak, and speculative futures positioning is not extended on the 1y and 2y lookbacks,” he said.
Although Hsueh is bullish on gold, he also noted some risks in the marketplace. He pointed out that Federal Reserve monetary policy represents both a significant opportunity and a risk for the precious metal.
The central bank’s new easing cycle should be supportive for gold, as lower interest rates reduce the opportunity costs of holding gold as a non-yielding asset. However, Hsueh said the Federal Reserve might not be as aggressive as some investors or economists expect, as inflation pressures remain elevated.
“Our U.S. 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. This is contrary to the further -70 bps priced by the market for 2026,” he said.
At the same time, uncertainty surrounding the Federal Reserve’s monetary policy independence—as it faces growing political pressure—remains a major unknown factor, but would ultimately be bullish for gold.
