Deutsche Bank frames gold's breakout as the financial manifestation of rising sovereign indebtedness and currency debasement risk. The bank notes that "the implied risks to the value of fiat currency remain embedded in the financial model via US government debt growth and the US dollar," pointing directly to IMF projections that show U.S. government debt continuing to expand through 2029 .

This macro backdrop provides the foundational stressor. Debt saturation limits real yield containment and weakens long-run currency confidence. DB argues that such conditions elevate gold valuations structurally rather than cyclically. The model thus embeds fiat fragility as a baseline support for higher gold prices rather than a tail-risk optionality.

This inversion of traditional gold market mechanics reframes price discovery. Historically, jewellery absorption capped upside during rallies as demand retreated at higher prices. Deutsche Bank's work shows that the price-setting marginal buyer has migrated toward entities indifferent to price sensitivity, principally reserve managers and institutional ETF investors. Supply is therefore being diverted away from elastic channels into structurally sticky demand pools.

The bank summarises this environment directly: "The positive structural picture shows inelastic demand from central banks and ETF investment diverting supply from the jewellery market. Also, overall growth in demand outpaces supply" .

Empirical data supports this structural theme. DB shows official gold demand reaching its third-highest real USD level in Q3 2025 , with cumulative annual purchases projected to rise again following a minor cyclical pause .

The bank quantifies the pricing impact of this trend by indexing post-2021 official purchasing intensity against historical ETF-price regressions. "We have quantified this excess performance by measuring the pace of official demand over the 2011-21 average, and indexing that to a historical ETF-to-gold price regression," DB writes .

This model adjustment is important because it explicitly allows gold to outperform its legacy macro correlations when sovereign accumulation diverges above prior regime baselines. It moves central banks from a secondary flow variable into a dominant price engine.

ETF demand plays a secondary but stabilising role. After nearly four years of sustained liquidation, Western ETFs returned to net accumulation across 2025 . DB further observes that selling episodes now lag price impulses rather than leading them. "The largest day of ETF selling took place a full four days after the sharpest daily decline in gold," the bank notes, implying a limited causal role from ETFs in near-term drawdowns .

Jewellery consumption, traditionally a stabilizer on both the upside and downside, remains suppressed in DB's outlook. Figure 12 indicates that higher real gold prices continue to constrain jewellery consumption into 2026 .

This dynamic paradoxically reinforces bullish structural conditions. Weak jewellery demand removes a volatility buffer but also prevents demand substitution away from inelastic buyers. Prices become less anchored to retail affordability metrics and more responsive to institutional balance-sheet demand.

On the supply side, DB finds that mine output continues to expand only modestly, while recycled supply remains below historical peaks. Beta analysis confirms supply sources respond weakly to price movements compared to demand sectors .

This muted supply elasticity compounds the demand distortion. Structural inflows into official reserves are not met with proportionate increases in production or scrap recovery, creating persistent imbalance risk that can only resolve via price adjustment.

Based on these interlocking drivers, Deutsche Bank revised its gold outlook meaningfully. "These factors argue for an upgrade to our 2026 forecast towards USD 4,450/oz from USD 4,000/oz previously, and a yearly range from USD 3,950-4,950/oz in 2026. A high of USD 4,950/oz would be a premium of 14% over current Dec'26 GC futures," the report states .

Deutsche Bank remains explicit on downside contingencies. The bank identifies equity market drawdowns as potentially damaging due to gold's positive correlation with risk assets in certain regimes, along with its expectation for less Federal Reserve easing than current market pricing assumes in 2026. Geopolitical normalization, including a negotiated end to the Russia-Ukraine conflict, is described as a temporary negative, though longer-term reserve diversification trends remain the dominant variable .

Deutsche Bank's work formalizes a macro reclassification of gold:

In regime terms: the floor is raised and the roof is raising.

Within this framework, Deutsche Bank's USD 4,450 base forecast and USD 4,950 upper-band scenario function less as cyclical extremes and more as stepping stones within a longer structural repricing arc.