Deutsche Bank Sees Gold Fair Value at $4,700 Amid Ongoing 'Explosive Phase'

Deutsche Bank analysts believe gold remains in an "explosive phase" of price behavior that began in August 2024, with the firm’s modeling suggesting a fair value significantly above current levels. In a note to clients on Monday, the bank maintained its fourth-quarter forecast for the precious metal at $4,600 per ounce.

A Persistent 'Explosive Phase'

According to research analyst Michael Hsueh, a statistical measure known as the BSADF test indicates the current market behavior is one of only five such episodes observed in data going back to 1975. The bank's analysis builds on earlier work by the Bank for International Settlements (BIS), which had described bubble conditions for the metal beginning in August 2024.

While the BSADF statistic has moderated from a peak of 3.3 to 1.3, Deutsche Bank noted that it remains above its 95% critical value. This suggests to the analysts that the explosive phase, characterized by sharp price movements, persists in the market.

Modeling Fair Value

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To determine where prices could be headed, the bank approached the question from three analytical angles, yielding a wide range of potential outcomes.

• Commodity Ratios: Adjusting gold's relative price to other commodities for long-term growth rates implies a potential downside toward $2,600 an ounce.
• Statistical Regression: A regression of gold prices against the BSADF statistic suggests a more muted correction in this cycle, with a potential bottom forming around $3,900 an ounce.
• Core Model: The firm's primary fair value model, which accounts for factors like excess official demand and real rate convexity, points to a fair value of around $4,700 an ounce by the end of the year.

Outlook and Forecast

Despite the varying scenarios, the bank's core model indicates that gold has "closed the gap to fair value." Based on this analysis, Deutsche Bank concluded that a year-end fair value of $4,700 is likely, supporting its decision to maintain its official fourth-quarter 2026 forecast at $4,600 per ounce.