Analysts at Deutsche Bank have raised their forecast for gold prices next year, saying a recent surge in the yellow metal has “further headroom to run” thanks partially to the prospect of easing U.S. interest rates and ongoing challenges to the Federal Reserve’s independence.
In a note to clients, the analysts led by Michael Hsueh lifted their 2026 outlook for gold to $4,000 per troy ounce on average, up from $3,700/oz previously.
The move comes after spot gold prices touched the $3,700 level on Tuesday, fueled largely by expectations that the Fed will cut rates by at least 25 basis points at the end of its two-day policy meeting this week. Lower interest rates typically boost gold by reducing its opportunity cost, weakening the dollar, and lifting its appeal as an inflation hedge and safe-haven asset.
Meanwhile, markets flagged worries over the possible encroachment by the Trump administration on the Fed’s role as an independent body tasked with setting monetary policy to help ensure maximum employment and maintain price stability.
President Donald Trump has heavily criticized the Fed for what he perceives as not moving quick enough to slash rates to boost the U.S. economy, taking aim at Chair Jerome Powell’s leadership in particular. He has also attempted to oust Fed Governor Lisa Cook over alleged property transaction issues, although earlier this week a federal appeals court upheld an injunction rejecting Trump’s ability to fire Cook. The White House is anticipated to take the matter to the Supreme Court.
The Deutsche Bank analysts said that an ongoing challenge to Fed independence “and changes to the composition” of the rate-setting Federal Open Market Committee have created “uncertainty over how this will affect” the central bank’s adjustments to its policy instruments in response to economic conditions next year.
At the same time, official demand for gold is continuing at a pace around twice that of the 2011-2021 average, “with much of this on account of China,” the analysts said. Recent data showed that China’s net gold imports via Hong Kong rose 126.81% in July from June, while China’s central bank has been adding gold to its reserves in recent months.
Globally, gold demand, including over-the-counter trading, ticked up by 3% versus the prior year to 1,248.8 metric tons in the second quarter. Total investment demand was also up 78% year-over-year.
Still, the Deutsche Bank analysts warned of some headwinds facing gold prices, including strong equity returns, increased clarity around Trump’s aggressive trade agenda, an immigration crackdown decreasing the number of jobs needed to keep the U.S. unemployment rate in check, and the Fed potentially opting not to cut rates further in 2026.
The fourth quarter has tended to be the weakest for gold in recent years as well, they noted.
Source: Investing.com
