Deutsche Bank has reduced its near-term price outlook for gold, pointing to a repricing of U.S. monetary policy and resilient domestic economic indicators as the chief factors pressuring the metal, while also noting few signs of traditional investment support.
Analyst Michael Hsueh now places the bank's base-case forecast for gold at $4,800 per ounce for the fourth quarter, a projection he describes as "consistent with an indefinite Fed hold." Hsueh also set out a downside risk scenario: if markets price in three to four additional Federal Reserve hikes, gold could fall to $3,800 per ounce.
Hsueh highlighted the first Federal Open Market Committee meeting under Chair Kevin Warsh as a turning point in market expectations, saying it "revealed no resistance to market pricing for hikes." He added that the post-meeting press conference reinforced the potential for a further hawkish tilt, and that a Taylor rule prescription sits at about 80 basis points above current policy levels.
The analyst identifies a recent divergence between gold and oil prices as the moment when Fed repricing became the dominant influence on gold.
On the demand side, Deutsche Bank flagged broadly negative signals for investment flows. The bank noted that ETF selling persisted after the May nonfarm payrolls report, futures open interest has dropped to a 17-year low, and net long positioning in the market is closer to year-to-date lows than highs. Together, these metrics point to subdued investor participation.
Geographic demand dynamics also appear unfavorable. The China premium for physical gold over Comex rates has inverted into a small discount, a shift the bank says suggests imports into China are unlikely to provide meaningful support. Separately, India's recent increase in the value-added tax on gold imports is expected to dampen demand from that market.
Deutsche Bank points to central bank purchases as the remaining supportive element for prices. The bank anticipates that emerging market central banks will continue to increase their gold holdings to catch up with developed market peers. However, Hsueh observed that official demand had not accelerated as of the first quarter and warned that it "will not compensate for otherwise slower investment demand on its own."
The combined picture drawn by the bank is one of policy-driven headwinds and weak investment inflows, with only measured support coming from official sector buying but not enough, so far, to offset the other pressures.