SadaNews - The American financial and investment services company Jefferies predicts a continued upward trend for gold, based on a structural shift in the precious metal market driven by central bank purchases and diversification of reserves, rather than relying solely on traditional factors such as real interest rates and the US dollar.
The company has identified three scenarios that could drive gold prices beyond the $5,000 per ounce level, at a time when it has raised its estimates for the metal to $4,650 per ounce by the end of 2026, which is an increase of nearly 5% from current levels.
Jefferies believes that traditional models for predicting gold prices have become less capable of explaining the strong rise in the metal recently, as the historical correlation between gold and both real interest rates and the US dollar has declined during 2024 and 2025.
Instead of relying on these indicators, the company rebuilt its model using data spanning approximately 30 years, from 1995 to 2025, focusing on three main factors: diversification of central bank reserves, gold's position relative to US Treasury bonds within reserves, and the size of the US fiscal deficit as a percentage of GDP.
Jefferies considers the shift towards gold within global reserves to be a key factor in determining price direction, especially with the acceleration of central bank purchases in recent years.
Central Banks at the Heart of the Matter
Diversification of reserves is one of the most prominent variables relied upon by Jefferies' model, as it measures net purchases of gold by central banks compared to the dollar's share in global reserves.
The company believes this indicator captures a structural shift in central bank behavior, whether through increasing their gold holdings or through a decline in the relative weight of the dollar in foreign exchange reserves.
Conversely, the model directly excluded some traditional drivers of gold, such as short-term US interest rates, growth in the money supply, and the dollar index.
Jefferies states that the impact of these variables remains, but it may manifest indirectly through government fiscal policies and central bank decisions regarding reserve allocation.
Based on its new model, Jefferies predicts that gold will reach $4,500 per ounce during the second half of 2026, and then $5,000 during the first half of 2027.
However, the company sees three separate scenarios that could push the price above $5,000 per ounce:
1. A resurgence of the US fiscal deficit to levels approaching 14% of GDP, as occurred during the COVID-19 pandemic.
2. A decline in the dollar's share of global foreign currency reserves to below 40%.
3. Central banks doubling their gold purchases compared to their current pace.
These scenarios reflect the sensitivity of gold prices to changes in central bank behavior and global reserves.
Despite the bullish outlook, Jefferies warns that a slowdown in central bank purchases or a shift to net sales of gold could pose a significant blow to prices.
The company views the continued accumulation of gold in reserves as one of the most important pillars of the current upward trend, and thus, any shift in this direction could impose significant pressures on the metal.
According to Jefferies' analysis, gold has more than doubled in value since the beginning of 2024 up to the period covered in this report, a performance the company sees as consistent with the accelerating trend of central banks worldwide towards diversifying their reserves and increasing their holdings of the precious metal.
Jefferies does not consider its model a replacement for comprehensive gold analysis, but rather as a tool that helps explain the structural trend of the market and challenges traditional models that it believes are less capable of explaining current prices.