Deutsche Bank: The "explosive" rally phase of gold is still ongoing.

With continuous central bank holdings increase and ETF capital inflow, Deutsche Bank believes that the "explosive" rally phase of gold has not ended yet.

According to the Chase Trading Desk, on August 14, Michael Hsueh, a commodity strategist at Deutsche Bank, released the latest research report *Commodities: Gold explosive phase*. Hsueh believes that the fifth round of "explosive" rally phase of gold that started in 2024 is still ongoing. Central bank gold purchases and ETF capital inflows form dual inelastic demand support, with the year-end price target range at $4700-5100 per ounce.

When the report was released, the spot gold price had been trading above $4300 per ounce. Deutsche Bank pointed out that the 30-day net inflow of ETFs has reached 1.5 million ounces, the cumulative global ETF position increase since the beginning of the year is about 4 million ounces, and the capital flow has turned positive again. Meanwhile, the central bank's gold purchase demand hit a record high in the first quarter of 2026 in real US dollar terms, reaching 38.88 billion US dollars.

The "Explosive" Phase: The Fifth Round Since 1979, Still Ongoing

Deutsche Bank uses the BSADF statistical test method to identify the "explosive" behavior interval of gold prices. Since 1979, gold has experienced five such phases in total. The current fifth round started in 2024, and the test statistic is still in the trigger interval.

Historical data shows that after gold enters the "explosive" state, the probability of positive returns in the next 5 years is higher (about 80% vs 68% in the non-explosive state), and the average increase during the rally is also larger. Specifically, in the scenario where the two-week increase reaches 10%-15%, the probability of gold rising 12 months later is 67%, and in the rising scenario, the average increase can reach 31%.

However, the current gold price range is in a compressed state relative to the BSADF statistic — the model shows gold "should have" risen to $6400 and "could have" fallen to $3700, and the current price is in the compressed range between the two.

Central Bank Gold Purchases: Demand Hits New High, Half Unreported

Central banks are the most critical structural buyers in the current gold market. Data shows that after annualizing the IMF data for the first half of 2026, the central bank's gold purchase volume reached 203.1 tons, and central bank demand is insensitive to prices — even if the gold price continues to rise, the purchase pace has not slowed down.

More notably, the report points out that about half of the central bank's gold purchase demand has not been reported through the IMF channel. Metals Focus data shows that since the third quarter of 2022, the quarterly size of unreported demand has jumped from the previous average of 95 tons per quarter to 286 tons per quarter.

The data also shows that Poland, Turkey and China are the central banks that have increased their gold holdings the most recently.

ETF Capital: Asian Buying, Developed Market Selling, Overall Turns Positive

ETF capital flow is the most sensitive marginal variable of gold price. Deutsche Bank data shows that since the beginning of 2026, the total net inflow of ETFs in the five major markets of the United States, Europe, China, Japan and India is about 4 million ounces, and the overall flow has returned to positive.

In terms of regional structure, Asia (China, Japan, India) is a net buyer, while developed markets (DM) are net sellers. China's ETF holdings have seen a net annual increase for the first time since 2020, and the buying pace has accelerated significantly since late July.

Deutsche Bank's quantitative analysis shows that for every 1 million ounces increase in ETF holdings, the gold price rises by about $14 per ounce (nominal value), which translates to a price elasticity of about 1%. The current combined demand from ETFs and central banks offsets the net selling pressure of futures speculative positions.

Price Model: Year-End Target of $4700-5100, Core Driver is US Debt

Deutsche Bank's long-term gold pricing model takes the expansion of US government debt as the core variable, supplemented by the US dollar exchange rate, 10-year TIPS real interest rate and equity risk premium.

Data shows that the year-on-year growth rate of US public debt in 2026 is expected to be 15% and 10% in 2027, which is much higher than the level in the early 2000s. The model predicts that the year-end gold price range is $4700-5100 per ounce, and the current price has converged with the model's fair value, with the residual close to zero.

Deutsche Bank points out that historically, sharp drops in gold prices are usually accompanied by two types of situations: first, extreme US dollar strength (such as the 77% rise of the US dollar index from 1981 to 1984); second, the Fed's unexpectedly hawkish tightening (such as the 2013 Taper Tantrum, the 2021-2022 interest rate hike cycle). Neither of the two risks is prominent at present.

Demand Structure: Jewelry Demand Falls to Lowest Level Since the Pandemic, Does Not Affect the Overall Pattern

The structure of gold demand is undergoing profound changes. The report shows that global jewelry demand in the second quarter of 2026 fell to 278.2 tons, the lowest level since the pandemic. India and China together account for 73% of jewelry demand, and high gold prices have significantly suppressed consumption in both countries.

However, Deutsche Bank believes that the decline in jewelry demand does not constitute a systemic risk. The reasons are: central banks and ETFs belong to "inelastic demand" and are insensitive to prices; while jewelry and recycled gold supply are "elastic" and will adjust automatically with prices. The hedging effect of the two makes physical investment demand relatively stable.

Market Sentiment and Positions: Call Option Premium Returns, Futures Positions Remain Low

From the perspective of market sentiment indicators, the 25-delta 3-month risk reversal indicator of gold has returned to the bullish premium range, after briefly falling into negative territory on March 19, 2026.

However, positions in the futures market are still at a low level. Deutsche Bank data shows that the open interest of gold futures once fell to the lowest level since 2009, which means that the current market positions are not crowded, and there is still room for prices to rise if capital flows in further.

Deutsche Bank also points out that the negative correlation between gold and the US dollar has periodically strengthened in the second quarter of 2026, with the 60-day rolling beta once reaching -7.12, but it has now returned to near the long-term average (-1.18). The correlation between gold and the Fed's interest rate cut expectations remains significant, and the interest rate pricing of the Fed's December 2026 interest rate meeting is the most relevant short-term anchor at present.

This article does not constitute personal investment advice, does not represent the views of the platform. The market is risky, investment needs to be cautious, please make independent judgments and decisions.

This article is from the WeChat Official Account "Wall Street CN", Author: Long Yue, published with authorization from 36Kr.