Deutsche Bank ups gold forecast to $4,000

[Gold]
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Gold (XAUUSD:CUR [https://seekingalpha.com/symbol/XAUUSD:CUR]) has more room to run, according to Deutsche Bank, which sees the commodity touching a $4,000/oz average next year.

"With gold having reached our 2026 average forecast of USD 3,700/oz, we believe that further upside is more likely than a correction down to financial fair value," Deutsche Bank's analyst, Michael Hsueh, said.

Gold (XAUUSD:CUR [https://seekingalpha.com/symbol/XAUUSD:CUR]) is enjoying [https://seekingalpha.com/news/4495032-gold-prices-surge-to-record-highs-as-investors-seek-safe-haven] its biggest rally in decades, climbing 40% this year, and the surge marks the sharpest annual increase since 1979, when inflation fears drove a global rush into precious metals.

Hsueh believes that the FX and rates environment is still conducive to further upside, all while positioning indicators are not stretched. "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."

Unlike past crises, today’s demand is reportedly being fueled by policy uncertainty in Washington, concerns over the U.S. dollar and geopolitical instability, according to a Wall Street Journal article.

Markets have been quite volatile given Donald Trump's tariff policies and his repeated criticism of the Federal Reserve. Geopolitical conflicts have also destabilized the markets. Investors from retirees to hedge funds are piling in.

Hsueh believes further upside is supported by central bank purchases, particularly from China, running at roughly twice the 2011–2021 average.

Deutsche also expects the Fed's easing cycle to restart, where its economists see downside risk to its base case of holding rates steady in 2026 after three cuts in 2025. "An ongoing challenge to Fed independence, and changes to the composition of the FOMC creating uncertainty over how this will affect the Fed’s reaction function next year."

The dollar has also lost its high-yielding G10 status, encouraging foreign investors to hedge U.S. assets.

Hseuh also pointed to some risks, including strong equity performance, immigration policy constraining labor supply and seasonality. Q4 is typically a weaker quarter for gold.

Another potential negative could be positive conclusions to U.S. trade negotiations that reduce uncertainty for business investment.

The analysts also raised silver forecasts to $45/oz from $40/oz.

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