Gold slides as Deutsche Bank cuts forecasts on a hawkish Fed and fading demand

Gold extended its recent decline on Tuesday and Deutsche Bank sharply lowered its price forecasts, as a stronger dollar and growing expectations that the Federal Reserve will keep policy tight, or even tighten further, eroded the appeal of the non-yielding metal. Spot gold fell as much as roughly 1.5% to around $4,120 an ounce, while silver, which tends to move with gold but more violently, dropped close to 5%.

Deutsche Bank cut its gold-price forecasts by as much as 22%, reducing its third-quarter projection to $4,300 an ounce and lowering its fourth-quarter target by about 17% to $4,800. The bank pointed to a repricing of expectations for Fed policy, combined with resilient US economic data, as the primary forces weighing on the metal. It cautioned that if the central bank were to raise rates several times, gold could fall toward $3,800 an ounce, while its higher targets assume the Fed instead holds steady.

The move underscores how quickly sentiment has shifted. After climbing to a record high near $5,600 an ounce earlier in the year, gold has given back a substantial portion of those gains as hopes for monetary easing faded. The metal's bull case had rested heavily on falling real yields and a softening dollar; with both of those conditions reversing amid firmer inflation and a more hawkish Fed, the rationale for holding a zero-yield asset has weakened.

Deutsche Bank also flagged signs of fading investment demand. It noted that continued outflows from gold-backed exchange-traded funds suggest one of bullion's traditional sources of support is now notably absent. The bank further pointed to a discount on China's onshore gold prices relative to international futures, which it said implies that imports are unlikely to provide meaningful support for the market in the near term.

The revision follows a similar move by another major bank, which recently trimmed its own year-end gold forecast after concluding the Fed is unlikely to cut rates this year. Together, the downgrades reflect a broader recalibration across Wall Street, where the elevated rate environment and a firm dollar have replaced the easing expectations that underpinned much of gold's earlier ascent.

Not all of the supports have eroded, however. Deutsche Bank emphasized that central-bank purchases continue to provide strong underlying demand for gold, a trend it expects to persist as monetary authorities diversify their reserves. That official-sector buying has been a structural pillar of the market and helps explain why many analysts remain constructive on the metal over the longer term even as near-term forecasts come down.

The pullback also unfolded against a turbulent backdrop for markets more broadly, with a global selloff in technology shares and a firmer dollar reflecting the same hawkish-Fed narrative pressuring gold. For now, the metal's near-term direction appears closely tied to the path of US monetary policy and the dollar, with the prospect of higher-for-longer rates capping a market that, only months ago, was setting record highs. Whether gold stabilizes or extends its slide is likely to hinge on incoming inflation data and how decisively the Fed signals its next move.