$3000 Gold Price: From Possible to Likely

$3000 Gold Price
Published on: Apr 17, 2024

Just two months ago, Citigroup believed that the gold price reaching $3,000 per ounce by 2025 was an extremely optimistic outlier scenario. However, this Tuesday, Aakash Doshi, Citi North America Head of Commodities Research, stated in an interview that the $3,000 gold price is not only a possibility but also a high probability event now.

While Doshi expressed this view, the gold price is currently consolidating around $2,400 after the recent pullback from a record intra-day high. Last week, the gold price hit an intraday historical high of $2,448, followed by a significant decline, causing some near-term technical damage. However, commodity investor Dennis Gartman stated that gold has entered a multi-year bull market, with a potential rise to $3,000 in the next two years.

One key reason for the bullish outlook on gold is not just the increase in the price of gold in U.S. dollars, but also the fact that gold prices in various currency denominations have hit historical highs, including the Swiss franc, euro, pound, yen, Canadian dollar, and Chinese yuan. It is noteworthy that the U.S. dollar has strengthened significantly against other major currencies globally, hence the logic of a weak dollar and strong gold does not hold here.

Moreover, interest rates and bond yields are no longer able to dictate gold price movements. Gartman predicts that the Federal Reserve will only cut rates once or twice this year, and this would only occur after the U.S. presidential election in November. The market’s rate cut forecasts have reduced from 6 to 7 cuts at the beginning of the year to 3 to 4 cuts in February, further dropping to less than 2 cuts after the March U.S. retail data release. Despite the increasingly hawkish Fed, gold continues to rise significantly, which is quite remarkable.

Thus, the only explanation left is the demand for safe-haven assets like gold.

As geopolitical tensions escalate, the possibility of the U.S. government weaponizing the dollar is increasing, with considerations of directly seizing Russian assets. Other countries perceive this threat, so the trend towards de-dollarization will not reverse in the short term. Currently, gold remains the only viable alternative to the dollar.

Among all countries engaging in significant gold purchases, China’s actions are the most noteworthy. If China aims to compete for international currency status against the dollar, its gold reserve ratio must reach at least 20%. However, following 17 consecutive months of gold purchases, China’s central bank gold reserve ratio is only a little over 4%.

Doshi explains that the impact of large-scale gold purchases by central banks in the past two years has been twofold: first, it raised the bottom of gold prices, and second, it suppressed downward price volatility. The actual support bottom for the gold price may currently lie between $1,900 and $2,000.

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