Gold prices likely to reach as high as $3,000/oz over the next 12 months: Citi

Gold prices could surge up to $3,000 over the next 12 months, Citi analysts said, as a combination of strong physical demand, central bank purchases, and macroeconomic factors continue to support a bullish outlook for the yellow metal.

“The gold price path is unlikely to be linear, but average prices should trend higher in 2H’24 and 2025,” Citi analysts wrote in a note.

“We see the market supported well above $2,000-2,200/oz and regularly testing nominal ATHs into end-2024,” before surging to $3,000 in 2025, the firm added.

Several key factors underpin this bullish outlook.

Firstly, the market’s asymmetric risk skew has already demonstrated resilience, with gold prices rallying to $2,400 per ounce despite a strong US dollar, high interest rates, and robust equity markets.

“A negative turn in US growth exceptionalism should be positive for gold, enhancing bids for duration and haven assets, all-else equal,” the note continues.

“In a 6-12m context, Citi sees the risk skewed towards weaker growth and lower yields. US election uncertainty and a potential ‘red sweep’ would likely bloat fiscal deficits and boost term premia, enhancing spec gold demand for alt-fiat.”

The prospect of peak interest rates also supports this optimistic forecast. An easing cycle from the Federal Reserve, combined with a rally in Treasury markets, is expected to be a significant bullish factor for gold. Citi’s economists foresee a US recession later in the second half of 2024, which could catalyze lower yields and higher gold prices.

Moreover, official sector gold demand remains robust. Emerging market central banks, in particular, have been significant buyers of gold, a trend that is expected to continue.

Citi also points out strong retail demand from China, noting that Chinese consumers have been accumulating gold at record rates.

“Healthy Chinese gold price premiums suggest demand is pent-up and may stay strong,” analysts said.

Turning to other precious metals, Citi also has bullish forecasts for silver and copper. They project silver prices to rise towards $38 per ounce over the next year, driven by strong industrial demand, particularly from the solar PV and electric vehicle sectors.

For copper, the analysts anticipate new all-time highs of $12,000 per tonne by the turn of the year, bolstered by China’s energy transition initiatives and expected grid-related stimulus.