The normalization of global geopolitical turmoil and expectations of rising government debt are fueling a bull market for gold. While silver may benefit from investment enthusiasm and capital inflows from China and India in the short term, the eventual mean reversion of the gold-to-silver ratio is expected to limit silver's long-term gains relative to gold.
According to Deutsche Bank's commodity outlook report for 2026 released on January 26, the normalization of global geopolitical turmoil and growing government debt will continue to support precious metal prices. Against a backdrop of a weakening US dollar, structural supply-demand imbalances are highly likely to push gold prices to $6000 per ounce this year. The report also mentions that any corrections of around 10% should be viewed as buying opportunities.
Regarding silver, Deutsche Bank judges that new Asian investment demand has emerged for the "white metal" since December, potentially driving its absolute price higher. However, historically, the XAUXAG (gold-to-silver ratio) has typically reverted to its mean after extreme volatility rather than undergoing a complete reversal. Deutsche Bank's path assumption is for the ratio to return to 65 by 2027, with silver reaching approximately $95 per ounce.
The macro backdrop is characterized by the normalization of geopolitical turmoil and uncontrolled debt. The report points out that geopolitical turmoil has become a normalized trend. This increasingly uncertain global environment directly fuels the need for supply chain independence among nations, thereby driving up costs. More critically, intensified competition between major powers is exacerbating resource nationalism and the hoarding of strategic resources.
For precious metal investors, the most fundamental support comes from fiscal deterioration. Higher military expenditures are worsening long-term government debt expectations (NATO members agreed to increase military spending to 5% of GDP by 2035; under the leadership of Sanae Takaichi, Japan's target is for defense spending to reach 2% of GDP). The International Monetary Fund (IMF) indicates that the global government debt-to-GDP ratio could rise to 100% by 2029, potentially reaching 123% under adverse scenarios. Deutsche Bank states that this macro backdrop, combined with an expected sustained depreciation of the US dollar before the end of 2026, forms the fundamental logic for allocating to precious metals and physical assets.
Supply failing to meet demand is driving long-term gold appreciation. Demand from central banks and ETFs for gold is growing rapidly. According to the report, between 2022 and 2026, the net increase in demand from central banks and ETFs (965 tonnes) will only be half-met by recycled gold (334 tonnes) and increased mining supply (145 tonnes), indicating a significant supply-demand gap. Notably, IMF official demand data for Q4 2025 shows that countries like Finland, Brazil, and Poland were purchasing gold at their strongest pace for the year, signaling that central bank buying is no longer confined to traditional emerging markets.
Even if global gold jewelry consumption in 2026 is only two-thirds of the 2021 level, this demand has been entirely replaced by demand from central banks, ETFs, and physical bar and coin investment. ETF gold holdings saw their first net inflow in five years during 2025, and ETF assets under management remain at conservative levels relative to the gold price, suggesting room for further increases.
The gold rally is sustainable, and short-term pullbacks should be seen as buying opportunities. Deutsche Bank believes investors' motives for increasing gold holdings differ from the inflation-hedging demand of the 1980s. Instead, they are based on concerns over the risk of frozen USD assets, the need for non-USD asset allocation, and expectations of long-term government debt growth. These structural factors are more enduring than cyclical ones and are unlikely to lead to a gold price crash like the one that followed the subsidence of inflation in the 1980s. However, Deutsche Bank notes that gold may have already formed crowded long positions, potentially leading to short-term corrections of around 10%, similar to those seen in 2025, but such pullbacks should be viewed as opportunities to add positions.
Deutsche Bank's regression model suggests that, under a base case scenario, the gold price will rise to $6000 per ounce this year. In an optimistic scenario, the price could reach $6900 per ounce; in a pessimistic scenario involving unexpected USD strength, the lower bound for gold is $3700 per ounce.
Silver is expected to continue rising in the short term but will be constrained long-term by mean reversion of the gold-to-silver ratio. China and India are contributing to demand growth. Deutsche Bank points out that the Reserve Bank of India's announcement, effective April 2026, to allow silver as loan collateral (similar to gold) will significantly enhance silver's status as a household store of value. Against a backdrop of a weakening Rupee, this could trigger import hoarding (especially considering the potential reinstatement of a 15% tariff, versus the current 6% rate). Simultaneously, China has strengthened tax collection on capital gains and dividends from overseas investments, which may prompt funds to转向转向 domestic precious metal investments; this aligns with record premiums for Chinese silver ETFs seen in late 2025.
Industrial demand faces headwinds but is unlikely to reverse the trend in the short term. Citing Bloomberg, Deutsche Bank reports that the photovoltaic industry's reliance on silver has deepened, with silver's share of material costs in solar cells surging from 14% last year to 29%. Rising prices are forcing industries to seek alternatives (thrifting), but this is a slow process. Even considering a potential increase in recycled silver supply (projected to reach 350-450 tonnes in 2026), it would be difficult to fully offset the surge in investment demand.
In the long run, the gold-to-silver ratio will eventually revert to its mean. The report shows that since 1986, the ratio has experienced 5 sharp declines (correlated with US recessions) and 4 sharp increases, with mean reversion following each extreme deviation rather than a trend reversal. The report forecasts that the ratio may move closer to the 2011 level of 32 in the short term (equivalent to a silver price of $156 with gold at $5000), but will ultimately revert to around 65 by 2027, corresponding to a silver price of approximately $95 per ounce.
Risk warnings and investment implications are outlined. The report indicates that a key risk for the gold market is that positioning may already be very heavy but not visible. Rising three-month implied volatility suggests the market anticipates one-week realized volatility moving towards 2025 peak levels, a year that saw multiple 10% short-term corrections. However, Deutsche Bank believes such adjustments should be viewed as tactical buying opportunities.
For silver, the report advises investors to monitor two signals: changes in lending rates and the trajectory of gold prices. Currently high lending rates and Deutsche Bank's bullish view on gold support the judgment for short-term silver gains within the year. However, if these factors reverse, the silver price could face significant correction risks.
Overall, Deutsche Bank's conclusion is that the foundation for gold's structural bull market is more solid, making the $6000 target price reasonable. While silver may continue to benefit from investment enthusiasm in the short term, the ultimate mean reversion of the gold-to-silver ratio will cap its long-term gains relative to gold. For allocation-oriented investors, gold offers a more sustainable store of value; for trading-oriented investors, close attention should be paid to the technical indicators of the gold-to-silver ratio and changes in industrial demand.