Citi sees gold hitting $3,000 as investors seek hedge amid uncertainty
TLDR
- Gold expected to surge to $3,000/ounce in 6-18 months driven by investor inflows and Fed interest rate cut anticipation - Citigroup Inc.
- Current record high with most-active June contract at $2,383/ounce; prices further increase to $2,387/ounce in Singapore
- Analysts, led by Aakash Doshi, revise estimates for 2024 avg price to $2,350 and predict 2025 at $2,875 per ounce, with expectations of consistent trading above $2,500 in the latter part of the year
Gold is expected to surge to $3,000 per ounce over the next six to 18 months, driven by increasing investor inflows and anticipation of potential interest rate cuts by the Federal Reserve, Citigroup Inc. forecasts. This bullish projection joins a chorus of Wall Street banks that have revised their forecasts upward.
On Monday, gold prices achieved another record close, with the most-active June contract settling at $2,383 per ounce, marking a 0.37% increase. By 1 p.m. Singapore time on Tuesday, prices had risen further to $2,387 per ounce, suggesting sustained bullish sentiment.
Analysts, led by Aakash Doshi, have revised their estimates, anticipating an average price of $2,350 for 2024 and a significant upward adjustment of 40% for their 2025 prediction to $2,875 per ounce. They expect trading to regularly challenge and surpass the $2,500 mark in the second half of the year, reflecting growing confidence in gold's potential for further price appreciation.
Key Takeaways
Gold, renowned for its value as a hedge against inflation, typically thrives during periods of economic uncertainty when investors seek refuge from riskier assets like equities. Amidst escalating tensions in the Middle East, triggered by Iran's launch of over 300 drones and missiles toward Israel (most of which were intercepted by Israel's Iron Dome air defense system), demand for the safe-haven asset surged. Furthermore, gold prices often exhibit an inverse relationship with interest rates. As interest rates decline, gold becomes more attractive compared to fixed-income assets such as bonds, which offer lower returns. This relationship adds to gold's appeal, particularly in environments of falling interest rates. Last Friday, bullion prices soared to an all-time high of $2,448.80 per ounce intraday, underlining the heightened demand for gold amidst geopolitical uncertainties and declining interest rates.
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