Gold prices appear to be consolidating around the $5,000 mark, but this does not suggest the precious metal will linger at this level for long. An international bank has raised its price target for the second quarter.

ANZ Bank commodity analysts stated in a recent report that they expect gold to reach $5,800 per ounce in Q2, a significant increase from their previous target of $5,400 per ounce.

"While recent volatility has raised questions about whether gold has peaked, we believe the current rally is not yet mature enough to reverse," the analysts said.

A sharp pullback from last month's record high near $5,600 has led some investors to worry that gold could experience a steep decline, similar to historical cycles like the 1980 peak or the 2011 high.

However, ANZ Bank pointed out that the current market environment is fundamentally different, with gold receiving strong support from expectations that the Federal Reserve will implement at least two interest rate cuts this year. Easing inflationary pressures have also led markets to price in the possibility of a third cut before December.

"We anticipate two 25-basis-point cuts, in March and June. This will keep real interest rates on a downward trajectory, supporting inflows into gold. Geopolitical and economic uncertainties are likely to persist, with Trump continuing to use tariffs as a threat. Market attention is gradually shifting to the potential impact of tariffs, which has not yet fully materialized in economic and inflation data. Doubts about the Fed's credibility remain. This backdrop will strengthen investor preference for tangible assets like gold," the analysts noted.

The Australian bank also emphasized that, beyond U.S. monetary policy, gold remains the ultimate hedge against growing uncertainty in global financial markets.

Analysts added that as U.S. Treasuries lose their appeal, gold remains an attractive defensive asset. This is not solely a U.S. issue; rising global debt levels are diminishing the attractiveness of government bonds worldwide, including Japanese government bonds.

"The global financial system is undergoing a structural shift. U.S. Treasuries, once considered the world's largest risk-free asset and a benchmark for interest-bearing and tradable instruments, now face credibility issues. Soaring debt levels, concerns about Fed independence, and increased sanction risks have fundamentally altered their status. Consequently, investors are demanding higher premiums for long-term U.S. Treasuries, as seen in the widening spread between long and short-term bond yields," the analysts explained.

"Gold serves as a transitional asset, providing stability and diversification benefits when traditional anchors are under pressure. This is why strategic allocation to gold remains relevant—at least until geopolitical stability is achieved, U.S. structural fiscal issues are resolved, and Fed credibility is restored. These conditions are unlikely to materialize soon. In this context, gold's role as a store of value and a hedge is crucial."

Discussing different segments of the gold market, ANZ Bank noted that while central bank demand is expected to remain strong in 2026, broader investment demand will be the primary driver this year.

Analysts pointed out that even at higher price levels, there is significant room for growth as investors shift into gold-backed exchange-traded funds (ETFs).

"We expect continued inflows into gold ETFs, with total holdings potentially exceeding 4,800 tonnes this year. While Western markets continue to support ETF demand, significant growth is anticipated in emerging markets such as China and India. These regions' share of global ETF holdings is expected to expand further from the current 10%," the analysts said.

"An upside risk to our view is that if geopolitical or political risks worsen, allocations could shift from equities and bonds toward gold," they added. "Gold ETF assets under management account for less than 3% of total equity and bond holdings. This means even a slight reallocation of assets could have a disproportionately positive impact on gold prices."

ANZ Bank is also optimistic about silver's prospects. However, analysts indicated that due to its higher volatility, silver is unlikely to outperform gold this year.

"Silver's performance will remain tied to gold prices; strong investment demand leaves room for upside," the analysts stated. "That said, as industrial demand begins to respond to higher prices and investors turn cautious, silver's outperformance relative to gold appears to be nearing an end. Silver's trading range is likely to be wider."