Jefferies has built a new quantitative model for gold that drops real interest rates and the dollar in favor of central bank reserve behavior and fiscal deficits, targeting $4,650 per ounce by year-end. The firm lays out three extreme scenarios that could each independently push gold above $5,000 an ounce.
A model built on reserves, not rates
Jefferies scrapped its old regression framework after it stopped working. Gold broke away from its historical link to real interest rates and the dollar in 2024 and 2025, the firm said, leaving models built on those drivers implying prices well below the current spot rate.
In its place, Jefferies narrowed its regression window to 30 years, covering 1995 through 2025, and built the model around three variables: reserve diversification intensity, a binary flag for whether gold has overtaken U.S. Treasuries in central bank reserve holdings, and the U.S. fiscal deficit as a share of GDP. The reserve diversification measure divides annual net central bank gold purchases in tonnes by the dollar's share of global foreign exchange reserves, capturing both central bank buying and any erosion in the dollar's reserve status.
Three scenarios that could each drive gold past $5,000
The new model backs Jefferies' existing above-consensus forecasts of $4,500 an ounce for the second half of 2026 and $5,000 an ounce for the first half of 2027. According to Jefferies: "risk to spot is more likely to the upside over the medium term".
Three extreme scenarios could each independently push gold through $5,000 an ounce, the firm said: a return to Covid-era fiscal deficits of roughly 14% of GDP, the dollar's share of global FX reserves dropping below 40%, or central banks doubling their current pace of gold purchases.
The downside risk runs the other way
The same sensitivity to reserve dynamics that fuels the bull case also defines its biggest threat. Jefferies said a shift to net central bank selling would have a significant negative impact on gold, making a reversal in central bank accumulation the clearest risk to the forecast.
For equity investors, Jefferies points to major gold miners and royalty companies, including Newmont and Agnico Eagle, as the most direct way to express a sustained rally, since their revenue and free cash flow expand as realized gold prices rise above their all-in sustaining costs.
Source: Investing.com
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