Deutsche Bank has significantly lowered its gold price targets, warning that bullion could fall to $3,800 per ounce if markets price in three to four Federal Reserve rate hikes. According to Deutsche Bank analyst Michael Hsueh, the bank's revised base case expects gold to reach $4,800 per ounce by Q4, consistent with an indefinite Fed hold, while a risk scenario of pricing multiple hikes may bring gold to $3,800 per ounce. The downside scenario underscores a sharp shift in gold's drivers, with the report noting that Fed repricing together with resilient US macro data has played the primary role in pushing gold lower. As per The Economic Times, this represents a decisive turn in monetary policy risks for bullion.
The bearish outlook reflects growing expectations for Federal Reserve tightening, with nine officials now projecting at least one hike in 2026, as reported by Bloomberg. Previously, reductions were seen in December 2026 and March 2027, but Goldman Sachs economists have pushed back expectations for US rate cuts to June and December of next year. New Fed Chairman Kevin Warsh vowed to restore price stability, with some Goldman executives suggesting the Fed may need to raise rates as soon as September if inflation remains elevated. Nine officials now project at least one hike in 2026, with some Goldman executives warning that a hike may come as soon as September if inflation remains elevated. Rob Kaplan, vice chairman at Goldman Sachs and former Dallas Fed president, has already flagged this possibility in an interview with Bloomberg Television.
Asian demand signals have deteriorated significantly, with the traditional premium over global prices flipping to a discount in China, suggesting weaker imports. According to The Economic Times, a stronger yuan and signs of a stabilising property market are reducing the need for gold as a hedge. In India, demand is expected to soften further after a sharp rise in import taxes, with the report noting that the recent hike of gold import VAT is likely to suppress demand. This represents a fundamental shift in gold's traditional safe-haven appeal across major Asian markets.
Exchange-traded fund holdings have fallen to a low for the year, with ETF investors selling into the rise in gold prices, as reported by The Economic Times. Futures positioning remains subdued, with open interest at a 17-year low. The downgrade stems mainly from a weaker outlook for inflows into gold-backed exchange-traded funds, with World Gold Council data showing global gold-backed ETFs experienced outflows of roughly $2 billion in May. Weak investment flows and soft physical demand are weighing on the metal in the near term, with the report noting that ETF investors are sellers into the rise in gold prices.
According to Prithviraj Kothari, Managing Director at RiddiSiddhi Bullions Ltd. and President of the India Bullion and Jewellers Association Ltd., gold and silver fell sharply, 2% and 3% respectively, after the Federal Reserve signalled support for rate hikes. "Gold and silver fell sharply, 2% and 3% respectively, after the Federal Reserve signalled support for rate hikes, with new Fed Chair Kevin Warsh reaffirming the central bank's inflation-control mandate. Markets have fully priced in a rate increase by October, lifting Treasury yields and the dollar," Kothari stated. However, losses were later erased after President Trump signed an interim deal with Iran, reopening the Strait of Hormuz and lifting sanctions on Iranian oil exports. Technically, gold holds above $4,300 with resistance at $4,500-$4,550, while if silver trades above $70, it will eye $72-$75, with a break above $78-$80 signalling a stronger bullish move.
Despite the revised outlook, some supportive factors for gold remain, including central-bank purchases, as reported by NDTV Profit. Official sector purchases were seen at 50 tons a month this year and 40 tons a month next year. According to WGC's survey, roughly 45% of central banks plan to grow their reserves in the coming year. The World Gold Council estimates that gold purchased in the first quarter of 2026 actually increased over the fourth quarter of 2025 — 244 tonnes in Q1 2026, up from 208 tonnes in Q4 2025. Not all Wall Street banks are as cautious as Goldman, with J.P. Morgan Global Research projecting an average price of $6,000 per ounce by the end of Q4 2026, rising further to $6,300 per ounce by the end of 2027. This represents a significant divergence from Deutsche Bank's $3,800-$4,800 range, leaving investors with two very different views to weigh.
