Deutsche Bank sees gold at US$4,000 next year on Fed cuts, China

[MELBOURNE] Deutsche Bank expects gold to average US$4,000 an ounce in 2026, as US Federal Reserve rate cuts and buying by China’s central bank ensure that bullion extends its record-breaking rally.

The new forecast for 2026, up from the bank’s previous estimate of US$3,700, is consistent with rising support levels for gold, with fair value models suggesting that prices have room to run when accounting for excess demand from central banks, Deutsche Bank precious metals analyst Michael Hsueh said in a note on Wednesday (Sep 17).

“We expect that gold’s premium to these models will persist,” he wrote, adding central bank purchases could reach 900 tonnes next year, with much of that set to take place in China. “Further upside is more likely than a correction down to financial fair value.”

Gold rose to an all-time high above US$3,700 an ounce earlier this week as investors bet on a Fed rate reduction ahead of the central bank’s policy meeting later on Wednesday. Deutsche Bank expects the US central bank to cut rates three times by the end of this year.

The precious metal has gained about 40 per cent so far this year, and recently surpassed its inflation-adjusted peak reached from 1980, as persistent economic and geopolitical uncertainties have fanned haven demand.

Among the risks on investors’ radar, US President Donald Trump’s repeated attacks on the Fed have become a source of anxiety in recent weeks. Trump’s recent attempt to fire Fed governor Lisa Cook and his repeated criticism of chair Jerome Powell and other policymakers for not cutting rates fast enough has reinforced bets on a more dovish monetary policy. That, in theory, should support gold, which does not pay interest.

“The gold-bullish risk is clear from the potential for a loss of Fed independence,” wrote Hsueh, adding that Deutsche Bank’s latest forecast did not factor in such a scenario as central bank decision-making has not yet clearly diverged from policy orthodoxy. However, looming changes to the composition of the Federal Open Market Committee creates, “uncertainty over how this will affect the Fed’s reaction function next year”, he said.

Goldman Sachs said earlier this month that gold could rally to almost US$5,000 an ounce if the Fed’s independence were damaged and investors shifted just a small portion of holdings from Treasuries into bullion.

Deutsche Bank economists expect the US central bank to hold rates steady in 2026, following three reductions this year. While that presents a bearish skew for non-yielding gold, there is now a “finer balance” in the US jobs market as Trump’s immigration policy has tightened labour supply growth, which could reinforce the case for further easing at a later point.

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Hsueh also raised the bank’s average 2026 price target for silver to US$45 an ounce, up from US$40 an ounce, as the metal heads into its fifth consecutive year of physical deficits. BLOOMBERG