Strategists at Deutsche Bank AG assert there is strong evidence to suggest gold prices have already bottomed out in 2026, noting that the precious metal entered a phase of "explosive price action" in August 2024 that has not yet concluded. This is the view put forward by Deutsche Bank strategist Michael Hseuh, who reaffirmed the bank's year-end gold price target of $4,600 per ounce. On Monday, gold (GC00) was trading at $4,117.80 per ounce, down 5% for the year but up 20% compared to 52 weeks ago.

Hseuh explained that an asset's price behavior is considered "explosive" when it deviates from historical norms and surges exponentially. Given that gold prices have more than doubled over the past two years, this description seems fitting for its trajectory. The Bank for International Settlements had already identified "bubble conditions" in the gold market as early as August 2024.

Hseuh's special report on gold (GC00) examines this "explosive price action phase" from three perspectives. First, he compared gold's long-term inflation-adjusted growth rate to other major commodities, including copper, oil, and, notably, bread. These growth rates ranged from 0.26% annually for bread to 3.44% for oil. Applying these averages to gold would result in a price of just $2,600 per ounce.

Second, he employed a backward super-augmented Dickey-Fuller test, an econometric tool used to identify and label the timing of speculative price bubbles. Using this method, Hseuh found that gold prices should peak at $6,400 and bottom out at $3,700.

Third, Hseuh's model indicates that the fair value for gold by year-end should be $4,700. This fair value, which uses inputs including the S&P 500 index, the 10-year Treasury yield, and exchange rates, has been adjusted downward due to a slowdown in official (i.e., central bank) purchasing. Given its proximity to Hseuh's previous $4,600 target, he is currently maintaining that forecast.

One of the fundamental observations Hseuh highlighted is that, over the long-term framework from 1957 to 2023, gold has outperformed the U.S. Consumer Price Index. The real return during this period averaged 2.5%, though this figure would be significantly higher if the recent boom phase of gold from 2024 onwards were included.