Citi Lowers Gold Price Targets on Peaking Market Deficit
Summary
Citi analysts have lowered their near- and medium-term gold price targets, citing a peaking market deficit and potential decline in investment demand. New targets are $3,300/oz for the next three months (down from $3,500) and $2,800/oz for 6-12 months (down from $3,000). Key drivers include global growth outlook, geopolitical risks, and U.S. economic data. Citi outlines bull, base, and bear case scenarios for gold's price trajectory.
Citi Lowers Gold Price Targets, Citing Peaking Deficit and Waning Demand
NEW YORK, NY – In a recent client note, analysts at Citi have revised down their near- and medium-term gold price forecasts. The bank cited a peaking market deficit for the precious metal and the potential for waning investment demand as key reasons for the adjustment.
Citi now projects gold to trade at $3,300 per ounce over the next three months, a reduction from their previous forecast of $3,500. For the 6-12 month horizon, the target has been lowered to $2,800 per ounce from the prior $3,000.
Why Citi is Turning Cautious on Gold
Citi's revised outlook is primarily driven by two factors:
-
Peaking Market Deficit: The bank's research suggests that the supply shortfall that contributed to gold's recent price strength may have already reached its peak. They believe the late-April high of $3,500 could mark the cycle high as mine production and scrap supply are expected to increase and catch up with demand.
- Base Case Scenario (60% probability): Citi forecasts gold falling below $3,000/oz by late 2025 or early 2026, supported by strengthening global growth confidence.
-
Potential Decline in Investment Demand: Citi anticipates that investment flows into gold ETFs and futures could slow. This could occur if:
- Economic sentiment improves, with modest global growth upticks reducing the appeal of safe-haven assets like gold.
- Tariff and geopolitical risks ease. In a bear-case scenario (20% probability), gold could slip below $3,000/oz if conflicts are resolved quickly and U.S. economic strength persists.
Despite these cautious notes, Citi highlighted that investment demand as a share of mine supply remains historically high, which could provide some support even in weaker price environments.
Forecast Ranges and Key Drivers
| Time Frame | Old Target | New Target | Drivers |
|---|---|---|---|
| Next 3 months | $3,500 | $3,300 | Tariff policy changes, high geopolitical risk |
| 6–12 months | $3,000 | $2,800 | Peaking deficit, improved growth outlook |
What Can Move Gold Next?
Several factors could influence gold prices moving forward:
- U.S. Tariff Policy Updates: New trade policy announcements could potentially boost safe-haven demand.
- Geopolitical Flashpoints: Renewed tensions in areas like the Middle East or other conflicts could trigger short-term rallies.
- U.S. Budget and Growth Data: Stronger-than-expected U.S. economic performance might undermine gold's appeal as a safe haven.
Bull, Base, and Bear Cases
- Bull Case (20% probability): A re-escalation of tariff or geopolitical risks, or renewed fears of stagflation, could drive gold back above $3,500/oz.
- Base Case (60% probability): Prices consolidate and drift below $3,000 as investment demand softens and confidence in global growth increases.
- Bear Case (20% probability): Rapid resolution of conflicts and robust U.S. economic conditions push gold towards $2,800/oz or potentially lower.
Investor Takeaways
Citi's analysis suggests investors should consider the following:
- Set Tactical Ranges: Prepare for gold price consolidation, potentially trading between $3,100 and $3,500/oz in the near term.
- Monitor Investment Flows: Keep an eye on gold ETF inflows and futures open interest as indicators of shifting market sentiment.
- Stay Alert to Geopolitics: Recognize that short-term price spikes remain possible if trade tensions or conflict risks re-emerge.
By integrating Citi's updated forecasts with real-time market data, investors can better navigate the evolving dynamics of the gold market and adjust their strategies accordingly.