Deutsche Bank has raised its gold forecast for 2026 to an average of $4,000 per ounce. This change is mainly due to ongoing purchases by central banks, especially China, and anticipated cuts in U.S. Federal Reserve interest rates. The earlier forecast was $3,700. The new prediction indicates that gold prices might stay above what fair-value models suggest. Analyst Michael Hsueh expects further increases, estimating central bank purchases could hit 900 tons next year.

Gold Market Dynamics

The forecast does not consider potential challenges to the Federal Reserve’s independence, which could lead to even higher gold prices. While the Fed is likely to keep interest rates steady in 2026 after three planned cuts, tighter immigration policies might influence labor supply and result in more easing. Deutsche Bank has also updated its 2026 silver forecast to $45 per ounce, up from $40. The silver market is facing its fifth year of physical deficits, impacting supply and demand. With the gold price forecast nearing $4,000, we see the main strategy in the coming weeks as building long-term bullish positions. The driving factors are the Fed’s easing policies and ongoing central bank demand. This isn’t just a short-term move; it’s a structural change that traders should prep for now. Looking back, the two Fed rate cuts in 2025 have given gold prices a solid base. With expectations for a third cut before the year ends, we believe the gold price will likely rise. Recent data from the World Gold Council reveals that central banks, particularly the People’s Bank of China, added 215 tons to their reserves in the second quarter of 2025.

Trading Strategies Overview

In the derivatives market, buying long-term call options seems like the best approach. We’re eyeing options that expire in mid-to-late 2026, with target strike prices around $3,500 to $4,000. Current low implied volatility in the gold options market presents a good chance to purchase these calls before larger price moves occur. For those who prefer a more conservative strategy, bull call spreads can be a cost-effective choice. A trader may purchase a June 2026 $3,200 call while selling a June 2026 $4,000 call. Although this caps potential gains, it greatly lowers the initial investment needed to start the position. Political pressure on the Fed’s independence is a key unpriced risk that could push gold prices beyond current models. Holding a small number of out-of-the-money calls could serve as a low-cost hedge against this scenario. We also see a bullish outlook for silver, which has a new average forecast of $45 per ounce. This projection is supported by a weaker dollar due to the Fed’s cuts and a severe ongoing supply shortage. The market faces its fifth consecutive year of physical deficits, a strong trend that shows no signs of ending. Recent data from The Silver Institute confirms that industrial demand, especially from the solar and electric vehicle industries, is exceeding mine production and recycling supply. The 2025 deficit is expected to be even larger than the 215.3 million ounce shortfall recorded in 2024. This tight supply situation offers a solid foundation against significant price drops. Traders should consider investing in silver futures contracts for direct exposure to the spot price. Alternatively, call options on silver ETFs offer a lower-cost opportunity to aim for the $45 target. We favor strike prices in the $40 to $42 range with expirations in the second half of 2026. Create your live VT Markets account and start trading now.

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