$8000 Gold? Sure, says Deutsche Bank
The ‘return of history’ has big implications for gold and the dollar
Deutsche Bank Research Institute says the world has returned to a battle of the superpowers, which has major implications for the US dollar and gold.
“In 1989, Francis Fukuyama argued that humanity had reached ‘the end of history’,” DB strategist Mallika Sachdeva and research analyst Michael Hsueh wrote in a report released this week.
“In the years that followed, the US became the uncontested hegemon, global trade exploded in a US-defined liberal order, developed market central banks sold gold, while emerging markets accumulated vast amounts of US dollar FX reserves.”
The report argues that the ‘end of history’ has come to an end.
“The world is back in a superpower struggle; the US is retreating from free trade, alliances, and security provision; the Great Economic Moderation is behind us; and the dollar banking system has been weaponised,” it said.
“The ‘return of history’ has big implications for gold and the dollar. “
Central bank reserves
DB’s report argues that the share of gold in central bank reserves is not driven by the global monetary system, but rather, by the global geopolitical environment.
“Gold’s decline as a share of reserves did not happen with the fall of Bretton Woods in the 1970s, but the fall of the Berlin Wall and the assertion of US hegemony in the 1990s,” DB said.
“As tectonic geopolitical plates shift again, the share of US dollars in central bank reserves is once more in decline.”
The share of US dollars in global central bank reserves has dropped sharply from its peak of around 60% at the turn of the century to 40% today,
“Importantly, the dollar’s losses as a share of central bank reserves have not gone to other fiat currencies, but to gold,” Sachdeva and Hsueh said.
At the same time, gold’s share in global central bank reserves has doubled in the past four years alone to nearly 30%.
“The fact that the gap between the dollar and gold as a share of reserves is now just 10% is extremely notable,” analysts noted.
Until the 1990s, gold had made up a larger share of central bank reserves than the dollar.
Sachdeva and Hsueh said it was too easy to write off gold’s rising share of reserves as a result of price increases.
“Indeed, around 80% of the rise in gold’s share has been on account of prices,” they said.
“But there is a genuine volume driver underlying this: central bank purchases have arguably themselves been behind significant price momentum.
“There is indeed a close relationship between official purchases and sales of gold and the change in the real gold price. Volume and prices are thus endogenously related and are both doing the legwork of gold’s rising share.”
It’s all about emerging markets
DB said the changing dynamics were largely being driven by emerging markets (EM).
“EM central banks have been actively buying gold and driving upward pressure on prices; crucially, their FX reserves may also now begin to structurally decline,” the report said.
“A ‘return of history’ would be consistent with gold getting to at least a 40% share of global reserves.”
As of the end of 2025, EM central banks held 16% of reserves in gold, with China holding just 9% of its reserves in gold.
DB argued there was significant scope for EM to grow their share.
“We find that EM countries with closer non-Western defence ties hold more gold,” it said.
“If the world diversifies trade and security dependence away from the US, this would be consistent with less USD and more gold in reserves.”
EM central banks have purchased more than 225 million ounces of gold over the past 17 years, which is more than advanced economy central banks sold in the 1990s.
EM central banks still only hold half the amount of physical gold of developed markets (DM), with 367Moz at the end of 2025, versus 712Moz held by advanced economies.
“The ratio of EM/DM central bank gold holding is at around 52%, having risen from just 20% before the 2008 GFC,” DB said.
DM central banks held 34% of reserves in gold as of the end of last year,
“There thus remains a significant gap to close, if not ultimately exceed,” DB said.
The latest World Gold Council figures, released on Wednesday, support DB’s thesis.
Central banks purchased an estimated 244 tonnes of gold in the first quarter, with demand exceeding the previous quarter and the five-year average.
The National Bank of Poland was once again the largest purchaser, increasing its gold reserves by 31t over the quarter to 582t, tracking closer to its 700t target.
The Central Bank of Uzbekistan added 25t to its gold reserves during the quarter, taking its gold holdings to 416t, or 87% of the bank’s total reserves.
The People’s Bank of China increased its gold reserves by 7t in Q1, more than doubling its net purchase in the previous quarter, while other buyers included the National Bank of Kazakhstan (12t), Czech National Bank (5t), Bank Negara Malaysia (5t), Bank of Guatemala (2t), National Bank of Cambodia (2t), Bank Indonesia (2t), National Bank of Serbia (1t) and the Central Bank of the UAE (1t).
What does this mean for gold prices?
DB simulated a range of different outcomes for gold prices depending on the level of FX reserves EM central banks end up with, and the share of gold in reserves they target.
It considered a steady state for EM FX reserves of US$8 trillion, as well as a drastic decline to US$2.5 trillion, a more modest decline to US$5 trillion and an increase to US$10 trillion, while for the share of gold in reserves, it looked at a range of different shares rising from 15% to 40%.
It noted that every 1Moz of gold purchases or sales drove a 1% increase or decrease, respectively, in gold prices.
Stable EM FX reserves and a 20% share of gold in reserves, close to today’s levels, results in a gold price of US$5300 an ounce.
Stable EM FX reserves and a 40% share of gold in reserves equated to a gold price of US$11,600/oz, while rises in EM FX reserves and a 40% share of gold in reserves resulted in a gold price of US$14,000/oz.
“As intuition would suggest, if EM central banks are targeting a rising share of gold in a steady or growing FX reserves environment, this would be the most bullish outcome for gold,” Sachdeva and Hsueh said.
“But even in an environment where EM FX reserves decline to US$5 trillion, if central banks target an increase of gold’s share to 40%, this could still be consistent with gold prices rising to near US$8000 over the next five years.”