Investing.com - Jefferies has built a new quantitative framework for pricing gold 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.
https://investing.com/pro/landing-pagelanding-page
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 Newmont and Agnico Eagle, 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.
https://www.investing.com/currencies/xau-usd
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