Central banks continue to increase their holdings, and ETF capital is flowing back, leading Deutsche Bank to believe that gold's "explosive" rally phase is not yet over.
According to sources, on August 14, Deutsche Bank commodity strategist Michael Hsueh released a research report titled "Commodities: Gold explosive phase." Hsueh believes that the fifth "explosive" rally phase for gold, which began in 2024, is still ongoing. Dual inelastic demand support from central bank purchases and ETF inflows provides a foundation, with a year-end price target range of $4,700-$5,100 per ounce.
At the time of the report's release, spot gold was already trading above $4,300 per ounce. Deutsche Bank noted that the 30-day net inflow into ETFs had reached 1.5 million ounces, with global ETF holdings increasing by approximately 4 million ounces year-to-date, as capital flows turned positive again. Simultaneously, central bank gold demand in the first quarter of 2026, measured in actual US dollars, hit a record high of $38.88 billion.
The 'Explosive' Phase: Fifth Occurrence Since 1979, Still Ongoing
Deutsche Bank uses the BSADF statistical test method to identify periods of "explosive" behavior in gold prices. Since 1979, gold has experienced five such phases. The current fifth phase began in 2024, and the test statistic remains within the trigger zone.
Historical data shows that after gold enters an "explosive" state, the probability of positive average returns over the next five years is higher (approximately 80% vs. 68% in non-explosive states), and the average magnitude of gains is also larger. Specifically, in scenarios where gold rises 10%-15% over two weeks, the probability of it being higher 12 months later is 67%, and in rising scenarios, the average gain can reach 31%.
The current gold price range is compressed relative to the BSADF statistic—the model suggests gold "should" be trading at $6,400, but it "could" also fall to $3,700. The current price lies within a compressed range between these two levels.
Central Bank Purchases: Demand Reaches New Highs, Half Unreported
Central banks are the most critical structural buyers in the current gold market. Data shows that annualized central bank gold purchases in the first half of 2026, based on IMF data, reached 203.1 tons. Importantly, central bank demand is price-insensitive—purchasing has not slowed despite rising gold prices.
More notably, the report indicates that about half of central bank gold demand is not reported through IMF channels. Metals Focus data shows that since the third quarter of 2022, the quarterly scale of unreported demand has jumped from a previous average of 95 tons per quarter to 286 tons per quarter.
Data also shows that Poland, Turkey, and China are the central banks that have increased their gold holdings the most recently.
ETF Flows: Asia Buys, Developed Markets Sell, Overall Turns Positive
ETF flows are the most sensitive marginal variable for gold prices. Deutsche Bank data shows that year-to-date in 2026, net inflows into ETFs across the five major markets of the US, Europe, China, Japan, and India total approximately 4 million ounces, returning to positive territory overall.
From a regional structure perspective, Asia (China, Japan, India) is a net buyer, while developed markets are net sellers. Chinese ETF holdings have recorded their first annual net increase since 2020, with a clear acceleration in buying pace since late July.
Deutsche Bank's quantitative analysis shows that for every 1 million ounce increase in ETF holdings, the gold price rises by approximately $14 per ounce (nominal value), translating to a price elasticity of about 1%. Current ETF and central bank demand together offset the net selling pressure from futures speculative positions.
Price Model: Year-End Target $4,700-$5,100, Core Driver is US Debt
Deutsche Bank's long-term gold pricing model uses US government debt expansion as the core variable, supplemented by the US dollar exchange rate, 10-year TIPS real yields, and equity risk premium.
Data shows that the year-on-year growth rate of US public debt is expected to be 15% in 2026 and 10% in 2027, far higher than levels in the early 2000s. The model predicts a year-end gold price range of $4,700-$5,100 per ounce, with the current price converging with the model's fair value and residuals near zero.
Deutsche Bank notes that historically, significant gold declines have typically been accompanied by one of two scenarios: extreme US dollar strength (e.g., the dollar index rising 77% from 1981-1984), or unexpectedly hawkish tightening by the Federal Reserve (e.g., the 2013 Taper Tantrum, the 2021-2022 rate hike cycle). Neither risk is currently prominent.
Demand Structure: Jewelry Demand Hits Pandemic-Era Lows, Does Not Affect Overall Picture
The structure of gold demand is undergoing a deep transformation. The report shows that global jewelry demand in the second quarter of 2026 fell to 278.2 tons, the lowest level since the pandemic. India and China together account for 73% of jewelry demand, and high gold prices are significantly suppressing consumption in both countries.
However, Deutsche Bank believes that the decline in jewelry demand does not pose a systemic risk. The reason is that central bank and ETF demand is "inelastic" and price-insensitive, while jewelry and recycled gold supply are "elastic" and adjust automatically with price. The hedging effect between the two keeps physical investment demand relatively stable.
Market Sentiment and Positioning: Call Option Premium Returns, Futures Positions Remain Low
From a market sentiment perspective, the 25-delta three-month gold risk reversal indicator has returned to the bullish premium zone, having briefly dipped into negative territory on March 19, 2026.
However, futures market positions remain low. Deutsche Bank data shows that open interest in gold futures briefly fell to its lowest level since 2009, meaning the current market is not crowded. If capital inflows increase further, there is still room for price upside.
Deutsche Bank also notes that the negative correlation between gold and the US dollar temporarily strengthened in the second quarter of 2026, with the 60-day rolling beta reaching -7.12 at one point, but it has since returned to near its long-term average of -1.18. The correlation between gold and expectations of Fed rate cuts remains significant. The interest rate pricing from the Fed's December 2026 FOMC meeting is the most relevant short-term anchor point.
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