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Gold has endured a sharp correction in 2026, but Deutsche Bank does not believe the larger price surge has run its course.
In a new research note, Deutsche Bank strategist Michael Hsueh said gold remains in an “explosive phase” of price behavior that began in August 2024. The bank maintained its forecast of $4,600 per ounce for the fourth quarter, while one of its valuation models places gold’s year-end fair value closer to $4,700.
The analysis comes during an unusually volatile period for the precious metal. After climbing to a record high above $5,500 per ounce in January, gold fell back toward $4,000 during the summer.
Prices then rebounded sharply on August 5. Spot gold rose more than 4% to approximately $4,257 per ounce by late Wednesday morning, while U.S. gold futures climbed above $4,300. Lower Treasury yields and a weaker U.S. dollar helped support the recovery.
The move brought gold considerably closer to Deutsche Bank’s target, although prices remained well below their January peak.
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What Does Deutsche Bank Mean by an “Explosive Phase”?
The term “explosive” may sound like a bullish prediction, but Deutsche Bank is using it in a statistical sense.
An explosive phase occurs when an asset begins rising at a rate that is difficult to explain through its normal historical trend. Instead of increasing gradually, the price accelerates and moves exponentially away from its previous relationship with economic fundamentals or comparable assets.
Deutsche Bank’s analysis uses a statistical method known as the Backward Supremum Augmented Dickey-Fuller test, or BSADF. Economists use this test to identify and date periods of explosive price behavior that may resemble speculative bubbles.
According to Deutsche Bank, gold has experienced only five such episodes since 1975. The current phase began in August 2024 and remains active because the BSADF reading is still above its 95% critical threshold.
The indicator has declined from a peak reading of 3.3 to approximately 1.3, suggesting the intensity of the move has cooled. However, it has not fallen far enough for Deutsche Bank to conclude that the explosive phase has ended.
The Bank for International Settlements previously reached a similar conclusion, identifying bubble-like conditions in the gold market beginning in August 2024.
That does not necessarily mean gold is about to crash or that its current price cannot be supported by underlying demand. It means the speed and scale of gold’s advance have been statistically unusual compared with its own history.
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Three Models Produce Three Very Different Gold Prices
Hsueh examined gold’s outlook using three different approaches.
The results ranged from deeply bearish to moderately bullish, demonstrating why estimating a single “fair” price for gold can be difficult.
Commodity Comparisons Point to $2,600 Gold
The most bearish approach compared gold with the long-term, inflation-adjusted growth rates of other commodities.
Deutsche Bank looked at copper, oil and even the price of bread. Their estimated long-term real growth rates ranged from approximately 0.26% annually for bread to 3.44% for oil.
When those growth rates were applied to gold using 1986 as a reference point, the analysis produced an implied gold price of only about $2,600 per ounce.
That would represent a severe decline from current levels.
However, the comparison also has limitations. Gold does not behave exactly like an ordinary commodity.
Oil and copper are primarily consumed through industrial and economic activity. Gold is also held as a monetary reserve, accumulated by central banks, purchased through exchange-traded funds and used by some buyers as protection against currency instability, inflation and geopolitical risk.
The $2,600 estimate is therefore better understood as an illustration of how far gold has separated from traditional commodity relationships, rather than as Deutsche Bank’s official price forecast.
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The Statistical Model Suggests Gold May Have Bottomed
The second approach examined the relationship between gold prices and the BSADF bubble indicator.
Based strictly on historical regression results, gold’s explosive phase could have pushed the price as high as $6,400 per ounce before producing a correction toward $3,700.
Neither side of that theoretical move occurred.
Gold peaked below $5,600 and its subsequent correction stopped well above $3,700. Deutsche Bank described both the upward extension and the downward correction as “muted” compared with what its historical model would have implied.
Hsueh believes this pattern provides reason to suspect that gold established a bottom near $3,900 during the 2026 pullback.
Spot gold traded near $4,030 on August 3 before recovering over the following two trading sessions.
Gold did not reach the precise $3,700 level suggested by the statistical model, but Deutsche Bank believes the correction may have come close enough for much of the downward adjustment to have already taken place.
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Deutsche Bank’s Fair-Value Model Points to $4,700
The bank’s third approach produced a much more constructive outlook.
This model estimates gold’s fair value using several financial-market variables, including the S&P 500, U.S. Treasury yields and foreign exchange rates. It also accounts for the way gold responds to changes in real interest rates and unusually strong official-sector demand.
After adjusting the model to reduce the assumed contribution from excess central bank demand and interest-rate effects, Deutsche Bank still calculated that gold’s fair value could reach approximately $4,700 per ounce by the end of 2026.
That estimate is close to the bank’s existing fourth-quarter target of $4,600, giving Deutsche Bank little reason to change its official forecast.
Gold was quoted at approximately $4,118 in the futures-market data cited when the Deutsche Bank report was published. From that level, a move to $4,600 would represent an increase of roughly 12%.
Following the August 5 rally, the remaining distance to Deutsche Bank’s target narrowed considerably. Market prices can change quickly, however, and a year-end forecast does not suggest that gold will move upward in a straight line.
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Central Bank Buying Rebounded Sharply in Q2
Central bank demand has been one of the most important forces supporting gold during the past several years.
Central banks have increased their gold reserves as they seek greater diversification, protection against geopolitical uncertainty and less dependence on individual reserve currencies.
The first half of 2026 initially appeared weak compared with the unusually strong levels of official buying recorded in recent years. However, the first-half total was heavily affected by a sharp Q1 slowdown and revisions to previously reported demand figures.
The World Gold Council revised its estimate for Q1 central bank demand from 244 tonnes to only 57 tonnes after reclassifying 187 tonnes as over-the-counter and other demand.
Central bank buying then recovered dramatically during the second quarter.
According to the World Gold Council, central banks purchased a net 289 tonnes of gold in Q2. That was approximately five times the revised Q1 total and the highest second-quarter figure on record. Poland and China were among the leading buyers, while official-sector selling moderated considerably compared with the first quarter.
Turkey’s disposals slowed substantially during Q2, leaving Russia as the only sizeable seller during the quarter.
The recovery complicates the argument that official demand is currently fading. First-half central bank buying was lower than the extraordinary totals recorded in recent years, but the most recent quarter showed renewed accumulation rather than broad-based retreat.
The World Gold Council expects central banks to remain significant gold buyers during the second half of 2026, although full-year demand may finish below its 2025 level.
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Gold ETF Demand Moved in the Opposite Direction
Although central bank buying strengthened in Q2, gold-backed exchange-traded funds experienced substantial outflows.
Global gold ETFs shed approximately 45 tonnes during the quarter, indicating that institutional and retail market demand did not move in the same direction as official-sector buying.
ETF flows can be highly sensitive to interest-rate expectations, movements in the U.S. dollar and changes in risk sentiment. Rising yields can make non-yielding assets such as gold less attractive, while lower yields and a weaker dollar can provide support.
This difference between central bank activity and ETF demand helps explain the mixed conditions surrounding gold.
Official buyers returned to the market in substantial numbers during Q2, but ETF outflows and changing expectations for Federal Reserve policy contributed to volatility and prevented demand from appearing uniformly strong across all categories.
Gold Has Outpaced Inflation Over the Long Run
Hsueh also emphasized gold’s long-term performance relative to inflation.
According to Deutsche Bank’s analysis, gold produced an average inflation-adjusted return of approximately 2.5% per year between 1957 and 2023.
In other words, gold did more than simply keep pace with the U.S. Consumer Price Index over that period. Its value increased after adjusting for inflation.
That calculation also ends before most of the dramatic advance that began in 2024. Including gold’s more recent performance would likely increase the measured long-term real return.
This does not mean gold beats inflation during every year or every economic cycle. Gold can decline or remain stagnant for extended periods, particularly after large price increases.
It does, however, challenge the idea that gold’s only long-term role is preserving the exact purchasing power of money.
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Has Gold Already Bottomed in 2026?
Deutsche Bank’s analysis provides several reasons to believe the worst of the correction may have passed.
Gold stopped falling before reaching the $3,700 level implied by the bank’s historical bubble regression. Its broader fair-value model remains above the current market price, and the BSADF indicator continued to classify gold as being in an explosive phase when the report was completed.
The sharp August 5 rebound also demonstrated that buyers were willing to return as gold approached the $4,000 level.
Spot gold rose to approximately $4,257 by late Wednesday morning, its highest price in nearly seven weeks. The rally was supported by lower Treasury yields, a weaker dollar and reduced expectations that the Federal Reserve would need to raise interest rates.
However, the outlook remains uncertain.
A renewed increase in real interest rates, a stronger dollar, continued ETF selling or an unexpected decline in central bank demand could place renewed pressure on gold.
The statistical analysis also serves as a warning that explosive phases do not continue indefinitely. Historically unusual price acceleration can be followed by substantial corrections, even when the asset retains a credible long-term case.
Deutsche Bank is not claiming that gold will move directly to $4,600 or that another pullback is impossible.
Its conclusion is more measured: the unusual price regime that began in August 2024 appears to remain active, the 2026 correction may have largely run its course and the bank’s fundamental model still places year-end fair value above current prices.
Gold's Next Move
Gold’s volatile 2026 performance has not persuaded Deutsche Bank to abandon its bullish year-end outlook.
One comparison suggests gold could be worth as little as $2,600 if it returned to its long-term relationship with other commodities. A statistical model implies the correction could have extended toward $3,700.
However, Deutsche Bank’s broader fair-value model, which incorporates stock prices, interest rates, exchange rates and official demand, points to approximately $4,700 per ounce by year-end.
For now, the bank is maintaining its $4,600 fourth-quarter target.
The recent data also show that central bank demand has not weakened as much as first-half figures might suggest. Official purchases rebounded to a record 289 tonnes in Q2, even as gold-backed ETFs experienced significant outflows.
Whether gold reaches Deutsche Bank’s target will likely depend on Treasury yields, the U.S. dollar, Federal Reserve expectations, ETF flows and the continued willingness of central banks to add to their reserves.
The bank’s central argument is that gold’s correction has not necessarily ended the larger trend. Despite the pullback from January’s record, the metal may still be operating within the explosive phase that began two years ago.
Disclosure: This article is for informational purposes only and should not be considered financial, tax or legal advice. Precious metals prices can be volatile, and past performance does not guarantee future results.
