Citi Believes Gold Price Will Rise to $3,000 in the Next 12 Months

Published on: May 24, 2024
Author: Caroline Kong

The price of gold fell this week and recorded its biggest weekly loss in nearly eight months. However, Max Layton, global head of commodities research at Citigroup, believes that the current pullback in gold prices is only temporary, as the Federal Reserve is set to cut interest rates several times over the next 12 months, which will push the precious metal up to $3,000 per ounce.

Earlier on Friday (25 May), Layton said in an interview with Bloomberg TV, by the end of this year, early next year, the Federal Reserve will have five interest rate cuts, which will become a key support factor to support gold to continue to move sharply higher.

Citi believes that gold being the most sensitive asset to interest rate changes, will eventually drive gold prices to $3,000.

He pointed out that the precious metal has recently been affected by the Fed’s weakened interest rate cut expectations, and has retraced downward by nearly $100. But one thing worth noting is that gold has clearly broken its relationship with real interest rates recently, driven by huge Chinese retail demand, which is one of the reasons Citi is bullish on gold prices.

He explains that Citi is seeing a major shift from property consumption to gold consumption in China. This has consumed almost all of China’s mine supply over the past three or four months, and coupled with demand from the central bank, China’s gold market has never been hotter.

Layton added that although gold has outperformed this year, in the commodities sector, the attention of many institutions and investors is still mainly focused on copper, and that could change in the future. Once the interest of investors turn to gold, gold price will rise swiftly. There is no shortage of new drivers for the precious metal right now, with China being the primary catalyst.

In fact, in April, Citi became one of the most bullish investment banks when it updated its 2025 gold price forecast to $3,000 per ounce. Analysts point out that financial demand for gold is catching up as the official sector, particularly emerging market central banks, have purchased record amounts of gold over the past few years.

Central banks’ purchases already exceed 1,000 tonnes in 2024, which would be the third highest since 1967. If there is an unexpected recession in the U.S. economy, there is little doubt that the price of gold will stand above $3,000 in the next six to 12 months.

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