Amid a recent period of subdued performance for gold, Commerzbank holds the view that the precious metal will ultimately break out of its current consolidation phase.

The bank's analyst, Carsten Fritsch, noted that market expectations have shifted from anticipating Federal Reserve rate cuts before the outbreak of Middle East conflicts to fully pricing in the possibility of at least a 25 basis point rate hike by the Fed by spring 2027. Consequently, the bank has revised its year-end gold price target down from an initial $5,000 per ounce to approximately $4,800 per ounce.

Fritsch added that this target implies gold still has some upside in the coming months, as "our new base scenario anticipates a two-month transition period, followed by the reopening of the Strait of Hormuz and a decline in Brent crude prices, which would reverse the current market expectations for rate hikes." At the time of writing, spot gold was trading at $4,445 per ounce.

Simultaneously, Fritsch maintained the forecast for gold to reach $5,200 per ounce by the end of 2027. He stated, "The structural factors supporting gold remain fully intact. These include a sustained erosion of confidence in the US dollar as a reserve currency, which is likely to drive continued central bank purchases. Furthermore, investor interest in gold is expected to remain elevated. This view is also supported by government debt levels that are already high and rising rapidly, which is leading to monetary policy that is too accommodative relative to inflation."

Due to weak industrial demand, Commerzbank has lowered its outlook for silver. The bank now forecasts silver prices around $80 per ounce by the end of 2026 and approximately $90 per ounce by the end of 2027, down from a previous target of $95.

Wall Street Debates Gold's Outlook

After a substantial rally over the past two years, the gold price surged to a near-record high of around $5,600 per ounce in January this year. However, following the outbreak of Middle East conflicts, gold failed to climb further on safe-haven demand and instead retreated significantly from its highs. The primary reasons are that the energy shock triggered by the Middle East conflicts has pushed inflation higher, and the potential for a new Fed Chair, Warsh, to prioritize balance sheet reduction over rate cuts has fueled expectations for a more hawkish Fed policy, weighing on dollar-denominated gold.

Additionally, profit-taking by investors after the prior price surge and gold reserve sales by some nations to raise cash have exacerbated selling pressure on the metal.

Gold's rollercoaster performance this year has investors closely watching its next move. As gold enters a correction phase, several major Wall Street banks have reassessed its price targets.

Morgan Stanley was among the first to cut its gold forecast in late April, revising its target for the second half of 2026 down to $5,200 per ounce, significantly lower than its previous $5,700 prediction. The firm cited the return of the classic negative correlation between gold and real interest rates due to geopolitical friction driving real rates higher and delaying Fed rate cuts.

JPMorgan revised its average gold price forecast for 2026 down to $5,243 per ounce from $5,708, noting in a report that COMEX gold futures open interest and trading volumes remain persistently low, managed money net futures positions are hovering near lows, and ETF inflows are tepid.

ANZ lowered its year-end gold target to $5,600 per ounce from $5,800 and pushed back its target for gold to reach $6,000 from early 2027 to mid-2027. Analysts at the bank noted, "The market currently seems caught in a dilemma between geopolitical anxiety and concerns about rising inflation."

Similar to Commerzbank, Citigroup recently expressed a bearish short-term view, predicting gold could touch $4,300 per ounce within the next three months. The institution believes that once a US-Iran cooperation consensus is successfully reached and shipping order is fully restored, leading international oil prices back to pre-conflict levels, market inflation sentiment will quickly weaken, allowing real interest rates to rise and consequently pressuring gold.

However, Citigroup has not turned entirely pessimistic on gold's medium-term outlook, maintaining a $5,000 per ounce target over the next 6 to 12 months.

Some institutions remain steadfast in their positive long-term view. Goldman Sachs maintains its bullish stance on gold, forecasting a resumption of the uptrend by the end of 2026. Analysts Lina Thomas and Daan Struyven stated in a report that gold's medium-term prospects remain solid, with prices potentially reaching $5,400 per ounce due to continued central bank buying and expectations for two more Fed rate cuts this year.

UBS last week lowered its gold price forecast for the end of 2026 to $5,500 per ounce from $5,900, citing persistent headwinds from high US Treasury yields and a strong US dollar. While UBS believes gold's structural bull market is not over, analysts Dominic Schnider and Wayne Gordon noted that investors may need greater patience in the face of these challenges. Nonetheless, their forecast still implies gold could rise another $1,000 by year-end.

UBS has consistently viewed gold as a tool to hedge against the broader secondary effects of conflict rather than direct frontline war threats. Its core function is to isolate and defend against monetary and macro-financial risks such as currency devaluation, surging fiscal deficits, and slowing economic growth triggered by geopolitical conflicts.

UBS analysts also acknowledged, "In the short term, rising energy prices and inflation concerns are boosting the US dollar and raising fears of potential rate hikes—both negative for gold. But we expect central banks to monitor inflation risks closely without hastily raising rates." Furthermore, the longer the US-Iran conflict drags on, the greater the risk of negative macroeconomic spillovers, which in turn would sustain demand for gold as a hedge.

UBS stated, "Over the long term, gold is an effective hedge against inflation. According to the Global Investment Returns Yearbook, since 1900, the real returns of gold and commodities have shown a positive correlation with inflation."

UBS also emphasized that structural trends will continue to support gold's appeal, noting, "We expect structural trends such as high government debt, and efforts by central banks and global investors to diversify and reduce dollar dependency, to underpin gold's long-term prospects. Therefore, given macroeconomic and political uncertainties beyond the risks from the US-Iran conflict, we remain positive on gold and believe the precious metal remains an effective portfolio diversifier. Investors interested in gold could consider an allocation of up to a mid-single-digit percentage (e.g., around 5%) within a diversified asset portfolio."

It is evident that a "bearish short-term, bullish medium-term" logic is the most distinct common feature in this round of reassessments by major Wall Street banks.

Regarding the medium-term outlook, Wells Fargo has even made a bold prediction of $8,000, primarily based on currency devaluation. Wells Fargo pointed out that the global economy has entered a fourth "cycle of currency devaluation," where rising debt, deficits, and inflation are eroding the value of fiat currencies like the US dollar. During such periods, investors often seek safe havens outside the traditional system, and historically, gold has been the best place to preserve wealth.

Wells Fargo strategists indicated that four out of five economic scenarios point to further currency devaluation, which could push gold prices to $8,000 per ounce by 2027. However, in a pessimistic scenario where devaluation momentum is weaker than expected, gold could fall to $4,000 per ounce by the end of 2027.

Canadian mining legend Pierre Lassonde has gone further, predicting gold could reach $17,250 per ounce as it replaces the US dollar as the ultimate reserve currency. Lassonde stated that today's extreme leverage makes the current economic cycle more volatile. In the late 1970s, gold prices rose tenfold as inflation and interest rates climbed in tandem, and now one must also consider the massive US sovereign debt. He believes the Fed is monetizing debt, providing a persistent tailwind for gold. He is confident the $17,250 target is not fanciful and expects the market to see it achieved within three years.