Gold's two-month price consolidation has not shaken Deutsche Bank's bullish outlook on the precious metal. Michael Hseuh, a precious metals strategist at the German bank, asserts that the "explosive rally phase" for gold, which began in August 2024, is not yet over. He has maintained the bank's year-end 2026 forecast for gold at $4,600 per ounce, unchanged.
This projection is built on a three-pronged analytical framework that includes a fair value model, statistical testing, and official sector demand data. The forecast also discounts the significant downside risks implied by commodity price ratios. For the market, this stance signals that despite gold trading in a narrow range between roughly $4,000 and $4,100 over the past two months, Deutsche Bank views the current consolidation as a normal pause within a broader explosive rally, not a trend reversal.
However, this optimistic view exists alongside a contrasting perspective. The Bank for International Settlements (BIS) had previously characterized the gold market since August 2024 as being in a "bubble state" as of December 2025. The BIS warns that similar historical patterns have often been followed by significant corrections, creating a point of tension with Deutsche Bank's bullish forecast.
The Three-Pillar Framework Supporting the $4,600 Target
Hseuh constructs his analysis from three distinct dimensions, all of which lead him to maintain the current price forecast. The first pillar is the commodity relative price ratio. After adjusting the long-term growth rate of gold's price relative to a basket of commodities from a 1986 baseline, this indicator suggests gold could have downside potential to $2,600 per ounce. This is the most bearish signal within the three frameworks.
The second pillar is the price correction magnitude under statistical testing. A regression analysis of gold prices using the Backward Supremum Augmented Dickey-Fuller (BSADF) test statistic shows that both the current upward extension and the subsequent downward corrections are more moderate than historical norms. Hseuh points out that the bottom of this correction may have already been established around $3,900 per ounce, rather than extending to the $3,700 level implied by the regression model.
The third pillar is the fair value model. After excluding excess official demand and the convexity adjustment for real interest rates, Deutsche Bank's model still suggests that the fair value of gold could reach approximately $4,700 per ounce by the end of the year. When combining all three frameworks, Hseuh believes it is appropriate to discount the significant downside risk suggested by the commodity ratio and place a higher weight on the fair value model. This latter model aligns more closely with the empirical sensitivity of gold prices to financial market variables and Deutsche Bank's cross-asset research views.
Record Official Demand Provides Structural Support
Hseuh specifically highlights that official sector demand for gold has surged to new highs. Data shows that official gold demand reached $45 billion in the second quarter of 2026, setting an all-time record. This figure is considered a crucial input variable for the gold fair value model. Although Deutsche Bank adjusts for excess official demand in its baseline model, the continuously rising volume of official gold purchases still provides structural support for gold prices. This factor, Hseuh argues, partially explains why the current correction in gold prices has been more limited than historical experience would suggest.
Balancing the BIS Bubble Warning with Gold's Long-Term Inflation Track Record
Deutsche Bank's optimistic outlook does not ignore the risks. Hseuh directly addresses the BIS's characterization of a gold bubble in his report. The BIS, in a December 2025 study, used the BSADF statistical test to indicate that the price process for gold had entered an "explosive interval" starting in August 2024. It cited the 1980 gold market as a historical example, where prices surged during the "Great Inflation" before experiencing a sharp correction. The BIS clearly stated that price breaks above critical thresholds "are often followed by significant corrections."
In response, Hseuh's argument rests on gold's long-term record of outperforming inflation. Data shows that despite gold underperforming the US CPI during two distinct periods—from 1957 to 1970 and from 1986 to 2000—it still delivered a real return of 2.5% over the entire cycle from 1957 to 2023. In contrast, the CPI averaged an annual gain of 3.7% during that same period. Hseuh believes that when the recent data from 2024 to 2026 is included, this outperformance will widen further.
Building on this, Hseuh poses a core question: after gold has significantly outperformed the CPI from 2024 to 2026, why should a phase of underperformance be expected next? His answer points to the fair value model and official demand data. Together, they indicate that the current rise in gold prices is not driven purely by speculative sentiment but has fundamental support. As a result, he concludes that the explosive rally phase has not yet come to an end.
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