Jefferies has developed a new quantitative model for gold pricing that suggests the metal could reach $4,650 per ounce by the end of the year. Unlike traditional approaches, the model sets aside real interest rates and the U.S. dollar exchange rate in favor of analyzing central bank reserve policies and budget deficits.
The forecast implies roughly 5% upside from current spot prices. For equity investors, the most direct way to participate in gold’s sustained rally remains large gold miners and royalty companies — in particular Newmont and Agnico Eagle, whose revenue and free cash flow mechanically increase as the realized gold price exceeds their all-in sustaining costs.
The intellectual foundation of the new model begins with a diagnosis: the old one stopped working. “In 2024–2025, gold moved beyond its historical dependence on real rates and the dollar exchange rate,” Jefferies notes.
“As a result, regression models based solely on these traditional price factors tend to value gold significantly below current spot levels and fail to provide meaningful conclusions within the current cycle.”
Instead of patching up an outdated concept, Jefferies built the model from scratch, narrowing the regression window to 30 years — from 1995 to 2025 — and focusing the model on three variables: the intensity of reserve diversification, a binary indicator of whether gold had overtaken U.S. Treasuries in central bank reserves, and the U.S. budget deficit as a share of GDP.
The reserve diversification variable is the model’s most original element. Jefferies defines it as the annual volume of net gold purchases by central banks in tonnes divided by the share of the dollar in global foreign exchange reserves — a coefficient that rises both when central bank gold purchases increase and when the dollar’s reserve share falls.
Wall Street analysts argue that this single metric captures a structural shift that traditional models completely overlook.
“Our analysis shows that global reserve diversification into gold — mainly by central banks (which has accelerated in recent years) — along with more familiar factors such as the fiscal position of developed-country governments, is a statistically significant factor that together explains a substantial share of gold’s annual volatility since 1995,” the analysts wrote.
Jefferies also intentionally excluded short-term U.S. interest rates, money supply growth, and the U.S. dollar index from the regression.
The company acknowledges that these variables affect gold, but argues that they are “indirectly accounted for through government spending models and central bank capital allocation decisions.” Short-term rates, the company adds, remain a relevant risk that should keep gold volatile even if they are no longer the anchor of the structural forecast.
The model reinforces Jefferies’ already above-consensus forecast: $4,500 per ounce in the second half of 2026 and $5,000 per ounce in the first half of 2027. The company characterizes these forecasts as supported, rather than revised, by the new quantitative work.
“The model strengthens our confidence that the structural drivers of gold remain intact and that the risks to the spot price in the medium term are likely tilted to the upside,” Jefferies said.
According to Jefferies, three extreme scenarios could on their own push gold above $5,000 per ounce: a return to COVID-19-era budget deficits of around 14% of GDP, a decline in the dollar’s share of global foreign exchange reserves below 40%, or a doubling of the current pace of central bank gold buying.
The scenario analysis clearly demonstrates how sensitive the model is to reserve dynamics — the same sensitivity also forms the main downside risk. Jefferies explicitly notes: “Our model, unsurprisingly, shows that a shift to net selling by central banks would have a significant negative impact on gold.” A reversal in central bank gold accumulation is the most obvious threat to the “bullish” scenario.
Jefferies positions the model as a tool useful for directionality rather than as a comprehensive one, describing it as a means to test existing forecasts, not a replacement for broader analysis.
The company notes that from the beginning of 2024 through the period covered by the report, gold more than doubled in price — a move that, it says, “fits well” with the acceleration of global reserve diversification into the metal.
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