Investing.com – Jefferies has built a new quantitative framework for pricing that targets $4,650 per ounce by year-end, scrapping traditional drivers like real interest rates and the U.S. dollar in favor of central bank reserve behavior and fiscal deficits.
The forecast implies roughly 5% upside from spot prices. For stock market investors, the most direct equity expression of a sustained gold rally remains the major gold miners and royalty companies — names such as and , whose revenue and free cash flow expand mechanically as the realized gold price rises above their all-in sustaining costs.
The intellectual case for the new model starts with a diagnostic: the old one broke. “Gold broke out to the upside from its historical relationship with real rates and the USD in 2024-25,” Jefferies wrote.
“As a result, regression models relying on these traditional price drivers alone tend to imply a gold price well below current spot and offer limited insight in the current cycle.”
Rather than patch a framework that no longer fits, Jefferies rebuilt from scratch, narrowing its regression window to 30 years — 1995 through 2025, and centering the model on 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 variable is the model’s most novel input. Jefferies defines it as annual net central bank gold additions in tonnes divided by the dollar’s share of global foreign exchange reserves, a ratio that rises both when central banks buy more gold and when the dollar’s reserve share erodes.
The Wall Street research firm argues this single measure captures the structural shift that legacy models miss entirely.
“Our analysis suggests global reserve diversification into gold, mostly by central banks (which has accelerated in recent years), alongside more well-understood factors such as the fiscal positions of developed market governments, are statistically significant factors which together have explained a meaningful portion of gold’s annual variance since 1995,” the analysts wrote.
Jefferies also deliberately excluded near-term U.S. interest rates, money supply growth, and the U.S. dollar index from the regression.
The firm acknowledges these variables influence gold, but argues they are “arguably captured indirectly through government spending patterns and central banks’ capital allocation decisions.” Near-term rates, the firm adds, remain a live risk that should keep gold volatility elevated even as they no longer anchor the structural forecast.
The model supports Jefferies’ existing above-consensus trajectory: $4,500/oz for the second half of 2026 and $5,000/oz for the first half of 2027. The firm frames these forecasts as reinforced, not revised, by the new quantitative work.
“The model reinforces our conviction that gold’s structural drivers remain intact and that risk to spot is more likely to the upside over the medium term,” Jefferies said.
Three extreme scenarios could each independently push gold through $5,000/oz on their own, according to Jefferies: 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 scenario analysis illustrates just how sensitive the model is to reserve dynamics, the same sensitivity that creates the primary downside risk. Jefferies is explicit: “Our model unsurprisingly suggests a shift to net CB selling would have a significant negative impact on gold.” A reversal in central bank accumulation is the clearest threat to the bull case.
Jefferies positions the model as directionally useful rather than exhaustive, describing it as a tool to challenge existing forecasts rather than a replacement for broader analysis.
The firm notes that gold more than doubled in price from the start of 2024 through the period covered by the report, a move it says “corresponds well” with the acceleration in global reserve diversification into the metal.