After months of sluggish and choppy trading, the gold market staged a powerful counteroffensive this week, posting its largest weekly gain since January. According to Dow Jones Market Data, COMEX gold futures for August delivery surged $291.60 this week, a 7.20% increase, to settle at $4,340.70 per ounce as of Friday’s close. This strong performance not only pushed gold prices firmly back above the $4,300 mark but also ignited bullish forecasts from Wall Street heavyweights, with UBS even calling for a target of $5,000 per ounce in the first half of 2027.<\/p>\n
The core driver behind this week’s gold rally was a dual shift in macro expectations. On one hand, the latest US employment data showed signs of weakness, hinting at an economic cooling. On the other, positive signals from US-Iran negotiations regarding navigation in the Strait of Hormuz significantly eased market fears of energy supply disruptions. As a result, international oil prices plunged this week, and the prospect of lower energy costs markedly alleviated inflationary pressures, leading to a rapid unwinding of bets on further Federal Reserve interest rate hikes.<\/p>\n
Data from the CME FedWatch Tool directly reflected this reversal in expectations: traders’ pricing for a rate hike in September plummeted to 44% from 67% a week ago. Gold, as a non-yielding asset, carries a high opportunity cost in a high-interest-rate environment, and the fading of rate-hike expectations effectively removed a key pressure point hanging over prices. Kyle Rodda, a senior financial market analyst at Capital.com, pointedly noted, “Gold is currently essentially a derivative of Fed policy expectations. The market’s downward revision of the implied probability of a Fed rate hike, combined with the view that Chairman Warsh’s policy stance may be less hawkish than previously anticipated, is jointly driving gold prices higher.”<\/p>\n
Noah Weisberger, Chief Strategist at BCA Research, expressed deeper concerns in his latest research note, arguing that gold has further upside potential and could even retest record highs. Weisberger emphasized that the market’s tolerance for Fed Chair Kevin Warsh’s policies is already very low following his July press conference. Should inflation prove persistently sticky, any erosion of the Fed’s credibility would directly translate into higher gold prices. Furthermore, potential risks in the bond market are also prompting investors to increase gold allocations in their portfolios to hedge against uncertainty.<\/p>\n
Looking back at this year’s trajectory, gold’s journey has been dramatic. In January, the precious metals market staged a parabolic rally, with gold futures briefly breaking above $5,600 per ounce to hit an all-time high. However, as bullish sentiment reached a fever pitch, capital rapidly rotated out and flooded into high-growth semiconductor and artificial intelligence plays, causing gold prices to reverse sharply. Last month, prices briefly dipped below the $4,000 mark, representing a roughly 30% drawdown from the record high. Recently, however, as concerns over persistent inflation and the credibility of Fed policy have resurfaced, gold buying has returned with force.<\/p>\n
Deutsche Bank clearly stated in a recently released research note that gold has been in an “explosive trend phase” since August 2024, and this trend is far from over. The bank’s strategist, Michael Hsueh, reiterated a price target of $4,600 per ounce by the end of 2026. To argue that current gold prices are not merely a speculative bubble, Deutsche Bank conducted a quantitative breakdown from three dimensions. Under the most pessimistic valuation model, if gold is benchmarked against the long-term inflation-adjusted annualized growth rates of commodities like copper, crude oil, or even bread (ranging from 0.26% for bread to 3.44% for crude oil), gold’s fair value is only $2,600 per ounce. However, using the academic mainstream BSADF bubble measurement model, the theoretical peak for this gold cycle could reach $6,400 per ounce, with a correction floor around $3,700. More critically, a multi-factor fair value model incorporating variables such as the S&P 500 Index, the 10-year US Treasury yield, and exchange rates calculates gold’s fair value at the end of 2026 to be as high as $4,700 per ounce.<\/p>\n
Michael Hsueh particularly highlighted a fundamental piece of evidence in his report\u2014gold’s long-term real rate of return. Data shows that over the ultra-long cycle from 1957 to 2023, gold has consistently outperformed US CPI inflation, delivering an average annual real return of 2.5%. If the current bull market from 2024 to the present is included in the statistics, the true annualized return would be even more striking. This clearly indicates that the current rise in gold prices is supported by solid fundamentals, rather than being driven purely by speculative sentiment.<\/p>\n
Among the chorus of bullish calls from various institutions, UBS’s forecast is the most audacious. The bank expects gold prices to climb to $5,000 per ounce in the first half of 2027. The prerequisites for achieving this target include: the Fed refraining from further rate hikes, a significant return of investment flows to the gold market, and continued purchases by global central banks. UBS maintains its forecast for global central bank gold purchases at 750 to 1,000 metric tons for the full year. The bank believes that while this massive buying scale is insufficient to single-handedly drive a sharp spike in gold prices, it is enough to stabilize the broader market and offset drags from weak sectors like jewelry demand.<\/p>\n
UBS further elaborated on three structural pillars supporting the medium-to-long-term bullish logic for gold prices. First, declining real interest rates will reignite investment demand. UBS predicts that as inflation gradually recedes, the Fed, after standing pat this year, will restart a rate-cutting cycle in 2027. A pivot in policy rate expectations will effectively lower real yields and weigh on the US dollar, creating a more favorable macro environment for gold. Second, a weaker US dollar and diversification needs. Although the dollar may remain resilient in the short term, the massive US twin fiscal and current account deficits, coupled with global investors’ overweight positions in dollar assets, imply room for renewed dollar weakness. Historically, a weak dollar is one of the strongest tailwinds for gold. Third, central bank buying provides a durable floor. Global central bank purchases reached 289 metric tons in the second quarter of this year, and driven by a long-term desire to reduce exposure to dollar assets, this trend will continue to underpin gold prices.<\/p>\n
Notably, for investors looking to participate in the gold market, gold mining stocks offer another high-beta pathway beyond futures and ETFs. According to MarketWatch, the world’s largest gold miners ETF, the VanEck Gold Miners ETF (GDX), currently manages $25.4 billion in assets. Based on FactSet data, GDX trades at a trailing price-to-earnings ratio of just 14.1 times and a forward P\/E as low as 10.4 times. In comparison, the S&P 500 Index has a trailing P\/E of 28.1 times and a forward P\/E of 20.2 times, highlighting the significant valuation advantage of gold miners.<\/p>\n
Noah Weisberger commented that the low valuations of gold miners are “noteworthy,” and many companies have substantially improved their profit margins and optimized their balance sheets. He also specifically emphasized the diversification value of gold miners: “If you are looking for a diversification bet uncorrelated to the AI theme, GDX has no correlation with any AI theme we can identify. In a market where the rally is led by companies with negative cash flow, holding cash-flow-generating companies as ballast is not a bad thing.”<\/p>\n
Although the market still faces short-term volatility risks\u2014especially if US economic data comes in stronger than expected, or if oil prices reignite inflation fears, potentially forcing the market to reprice a more hawkish rate path\u2014UBS explicitly recommends viewing pullbacks in gold prices to $4,000 or even lower as opportunities to build strategic positions, rather than as bearish signals.<\/p>\n","protected":false},"excerpt":{"rendered":"After months of sluggish and choppy trading, the gold market staged a powerful counteroffensive this week, posting its…\n","protected":false},"author":2,"featured_media":113214,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[129],"tags":[55143,55142,7100,4349,4906,55144,30670,223,7131,25022],"class_list":["post-113213","post","type-post","status-publish","format-standard","has-post-thumbnail","category-ubs","tag-bca-research","tag-comex-gold-futures","tag-deutsche-bank","tag-federal-reserve","tag-gold","tag-international-oil-prices","tag-kevin-warsh","tag-ubs","tag-us-iran-negotiations","tag-vaneck-gold-miners-etf"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@ch\/117061736664664037","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/posts\/113213","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/comments?post=113213"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/posts\/113213\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/media\/113214"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/media?parent=113213"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/categories?post=113213"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/tags?post=113213"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}