Deutsche Bank's bullish stance on gold has remained unshaken despite the metal's price consolidation over the past two months.

The "explosive rally phase" for gold, which began in August 2024, is not yet over, according to Deutsche Bank precious metals strategist Michael Hseuh. He has reaffirmed the bank's forecast of $4,600 per ounce for the fourth quarter of 2026. This prediction is based on a three-pillar framework of a fair value model, statistical tests, and official sector demand data, which discounts the significant downside risk suggested by commodity price ratios.

For the market, this stance means that while gold has traded in a narrow range of roughly $4,000 to $4,100 over the past two months, Deutsche Bank views this consolidation as a normal mid-rally pause rather than a trend reversal.

However, this optimistic view is contrasted by the Bank for International Settlements (BIS), which in December 2025 characterized the gold market since August 2024 as a "bubble state" and warned that similar historical patterns often lead to significant correction risks.

Three-Pillar Framework Supports Deutsche Bank's $4,600 Target

Hseuh built his analytical framework from three dimensions to arrive at the conclusion to maintain the forecast.

First, the commodity price ratio. After adjusting for long-term growth based on 1986 levels, the gold-to-commodity price ratio suggests a potential downside for gold to $2,600 per ounce. This is the most bearish signal among the three frameworks.

Second, the price correction magnitude under statistical tests. A regression analysis of gold prices using the BSADF (Backward Supremum Augmented Dickey-Fuller) test statistic shows that the current gold rally's upward extension and downward correction are both more moderate than historical patterns. Hseuh suggests that the bottom of the current correction may have already formed around $3,900 per ounce, rather than extending to the $3,700 level implied by the regression model.

Third, the fair value model. After excluding excess official sector demand and adjusting for convexity in real interest rates, Deutsche Bank's model still estimates gold's fair value could reach approximately $4,700 per ounce by year-end.

Combining these three frameworks, Hseuh believes the significant downside risk indicated by the commodity price ratio should be discounted, with greater weight given to the fair value model. The latter is more consistent with gold's empirical sensitivity to financial market variables and Deutsche Bank's cross-asset research views.

Record Official Demand Provides Structural Support for Gold Prices

Hseuh specifically highlighted that official sector demand for gold has reached new highs. Data shows that official sector gold demand in the second quarter of 2026 reached $45 billion, a new record.

This data is considered a key input variable for the gold fair value model. Although Deutsche Bank adjusted for excess official demand in its baseline model, the continued rise in official gold purchases still provides structural support for prices and partly explains why the current correction in gold has been more limited than historical experience.

BIS Bubble Warning and Gold's Long-Term Inflation-Beating Record Coexist

Deutsche Bank's optimistic outlook is not without acknowledging risks. Hseuh addressed the BIS's bubble characterization directly in his report.

The BIS published a study in December 2025, citing BSADF statistical tests, indicating that gold's price process has entered an "explosive zone" since August 2024. It uses the 1980 gold market as a historical example, when prices surged during the "Great Inflation" and then experienced a sharp correction. The BIS clearly stated that when prices break through a critical threshold, it is "often followed by a significant correction."

In response, Hseuh's argument rests on gold's long-term track record of outperforming inflation. Data shows that while gold underperformed the US CPI for extended periods from 1957 to 1970 and 1986 to 2000, it achieved a 2.5% real annualized return over the entire 1957-2023 period, compared to the CPI's average annual gain of 3.7%. Hseuh argues that incorporating recent data from 2024 to 2026 would further widen this outperformance.

On this basis, Hseuh poses a core question: After gold has significantly outperformed the CPI from 2024 to 2026, why should we expect it to underperform going forward? His answer points to the fair value model and official demand data, which together suggest that the current gold price rally is not driven purely by speculative sentiment but has fundamental support, meaning the explosive rally phase is not yet over.