Deutsche Bank Sees Explosive Phase Continuing in Gold Prices
Deutsche Bank's analysis of gold prices indicates that they are in an 'explosive phase' that began in August 2024. According to research analyst Michael Hsueh, this phase is similar to four others seen since 1975, with the current episode being ongoing.
Hsueh considered three approaches to determining fair value for gold prices. The first approach involved adjusting gold-to-commodity relative price ratios for long-term growth rates, which suggests that gold may decline further towards $2,600 an ounce. However, this is just one possible scenario.
The second approach used the BSADF test statistic, which shows that both upward extensions and downward corrections are 'muted' in this episode. This implies that gold has potentially bottomed out at around $3,900 rather than extending towards a regression-implied price of $3,700.
Deutsche Bank's third approach involved rolling back its model adjustments for excess official demand and real rate convexity. Even with these adjustments, the bank still sees fair value registering around $4,700 an ounce by year-end, above its previous forecast of $4,600 in the fourth quarter. The analysis builds on work by the Bank for International Settlements, which described bubble conditions beginning in August 2024.