Deutsche Bank Slashes Gold Price Forecast by 22%: Wall Street Bulls Retreat, Fed Rate Hike Expectations Become Biggest Drag

The Federal Reserve kept interest rates unchanged at its latest policy meeting, but officials sent increasing signals supporting rate hikes, with newly appointed Chairman Kevin Warsh explicitly stating his commitment to restoring price stability.

This hawkish shift has put direct pressure on the gold market. As a non-yielding asset, the opportunity cost of holding gold rises when market interest rates climb, and the remarks from Fed officials have fueled a continuous rise in rate-hike expectations.

Interest rate market pricing shows that the Fed's rate hike window for this year has been pulled forward significantly to September, from December prior to the policy meeting. In addition, the surge in energy prices during the early stages of the Middle East conflict has further reinforced market expectations of monetary policy tightening, acting as another key factor weighing on gold prices.

Hsueh emphasized in a report, "The market's repricing of Fed rate expectations, combined with the resilience of US macroeconomic data, is the primary factor driving gold prices down." He also warned that if the Fed implements three to four rate hikes, gold prices could fall to around $3,800.

In addition to monetary policy expectations, a material contraction in investment demand has also kept Deutsche Bank on alert. Michael Hsueh noted in the report that continuous net outflows from gold-backed ETFs indicate the market's "usual support" for gold is conspicuously absent. Data show that gold ETF holdings have declined for several consecutive weeks, reflecting a continuous weakening of investors' willingness to allocate to gold.

Meanwhile, physical gold prices in the Chinese market are trading at a discount relative to Comex futures, indicating that import demand is also struggling to provide support. As the world's largest gold consumer, weak demand in the Chinese market has further undermined gold's upward momentum. This simultaneous weakness in both domestic and foreign demand leaves the gold market facing dual pressures.

However, Deutsche Bank emphasized that ongoing gold buying by global central banks constitutes the most important structural support for the current market. "The pillar of central bank demand remains solid, and we expect this trend to persist for quite some time," Hsueh wrote.

Deutsche Bank's cut to its gold price forecast is not an isolated event. A week ago, Goldman Sachs, which had accurately predicted the gold rally, was the first to pivot, slashing its year-end 2026 gold price target from $5,400 to $4,900, a reduction of $500.

Goldman Sachs' report pointed out that the "hawkish debut" of the new Federal Reserve Chair Warsh has altered the market logic. The stronger-than-expected hawkish signals sent at his first FOMC meeting eased market concerns over central bank independence, dampening demand for gold as a macro hedge. Goldman also warned that if the Fed hikes rates twice this autumn, gold prices could fall to $4,440 by the end of the year, nearly $500 below the baseline forecast.

However, institutional sentiment is not entirely one-sided. Citigroup ( C) has recently wavered, cutting its three-month target price to $4,000 on June 12 before raising it to $4,500 four days later. It characterized the previous decline as a 'price reset' rather than the end of the bull market, maintaining its 6-to-12-month bullish forecast of $5,000.

Bank of America ( BAC) acknowledged that short-term gold prices are unlikely to reach $6,000, but believes high fiscal deficits will support a long-term upward trend. JPMorgan Chase ( JPM) is the most optimistic, maintaining its year-end 2026 forecast of $6,000 and an average price of $6,263 for 2027, arguing that long-term structural factors continue to support the bull market.

This content was translated using AI and reviewed for clarity. It is for informational purposes only.