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Massive deficits and reserve diversification could lift gold above $5,000
Investment bank Jefferies has completely rewritten the rules for valuing gold, abandoning the traditional link to real interest rates and the US dollar value. The bank’s analysts say the old quantitative model is hopelessly outdated and no longer explains the current rally in the precious metals market.
Instead of conventional metrics, the bank’s new formula relies on different indicators, including central bank gold purchases, the dollar’s share in global reserves, and the size of the US budget deficit. According to these calculations, the spot price of the metal will reach $4,650 an ounce by year‑end and break $5,000 in the first half of 2027.
Jefferies argues that since 2024, gold has definitively moved beyond historical patterns. Structural shifts now dominate the market. Intensive reserve diversification away from the dollar and bloated budget deficits in advanced economies explain the asset’s volatility far better than the Fed rates, which the bank deliberately excluded from its new regression model.
Analysts identified three extreme scenarios capable of sending prices above $5,000 on their own. That will require either the United States returning to pandemic-level budget deficits of about 14% of GDP, the dollar’s share of global reserves falling below 40%, or a doubling of central bank gold purchases. The only realistic threat to the uptrend, they say, would be the reverse process if policymakers suddenly moved from hoarding bullion to selling it.
For investors seeking to profit from the new gold cycle, Wall Street recommends keeping strategy simple. The most direct play on the rally is to buy shares of major miners such as Newmont and Agnico Eagle. Their revenues should mechanically rise as the market price of the metal continues to outpace production costs.
Published 08 September 2026
© InstaFintech Group
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© InstaFintech Group
