Citi raises gold forecast as rate cut odds increase after weak jobs data

Citi has raised its three-month gold price forecast to $3,500 per ounce, up from $3,300, and its trading range to $3,300-$3,600, attributing the revision to a worsening U.S. growth and inflation outlook, new tariffs, and a weaker dollar. The bank expects these factors, alongside robust investor inflows, central bank purchases, and solid jewelry demand, to drive gold moderately higher towards new all-time highs, potentially nearly doubling its price by Q2 2025. This forecast comes as weak U.S. employment data has increased market expectations for a September Fed rate cut to 81%.

Analysis

Citigroup has upgraded its three-month gold price forecast to $3,500 per ounce, raising its expected trading range to $3,300–$3,600. The revision is predicated on a deteriorating outlook for U.S. growth and an increase in tariff-related inflation concerns, stemming from newly introduced tariffs on several key trading partners. This macroeconomic backdrop, combined with an expected weakening of the U.S. dollar, is projected to drive gold to new all-time highs in the second half of 2025. The bullish thesis is further supported by strong demand fundamentals, with Citi noting total demand has climbed over 30% since mid-2022 due to robust investor inflows, moderate central bank purchases, and resilient jewelry demand. The forecast is reinforced by recent market-moving data; a weak July jobs report, showing only a 73,000 gain in nonfarm payrolls, has pushed market expectations for a September Federal Reserve rate cut to 81%, a key catalyst for non-yielding, safe-haven assets like gold.

Key Decisions for Investors

• Given the confluence of negative U.S. economic indicators, anticipated monetary easing, and persistent trade tensions, investors may consider gold as a strategic hedge against both inflation and potential dollar weakness.
• Monitor upcoming U.S. employment and inflation data closely, as the forecast's validity hinges on continued economic softening which would reinforce the case for a September Fed rate cut.
• While the medium-term outlook is bullish, investors should note the potential for short-term volatility and profit-taking, as seen in the recent 0.1% dip following a 2% rally, and could view such pullbacks as potential accumulation opportunities.
• Pay close attention to U.S. trade policy developments, as further tariff escalations would likely amplify gold's safe-haven appeal, whereas any de-escalation could serve as a headwind to the price.