Gold expected to fall below $3K by early next year, Citi forecasts

Citi forecasts gold prices to decline from the current $3,391 per ounce to below $3,000 by year-end, driven by waning investment demand as the US mid-terms approach and potential positive impacts from President Trump's policies. The bank lowered its 1-3 month target to $3,300 and its 6-12 month target to $2,800, with a bearish scenario potentially seeing prices fall further to $2,500-$2,700 by the second half of next year if geopolitical risks ease and the US economy shows reassuring signs; however, emerging market central bank buying could provide some support.

Analysis

Citigroup has revised its gold price forecast downwards, anticipating a decline below $3,000 per ounce by the end of the year from the current spot price of $3,391. The bank's updated targets include a reduction in its one-to-three-month outlook to $3,300 per ounce from $3,500, and its six-to-twelve-month target to $2,800 from $3,000. Citi's base case projects gold to trade between $3,100 and $3,500 in the third quarter, influenced by sustained geopolitical tensions, President Trump's tariff policy updates, and US budget concerns, before a subsequent downtrend. This bearish outlook is primarily driven by an expected decrease in investment demand for gold in late 2025 and into 2026, contingent on the perceived positive impact of President Trump's popularity and US economic growth, particularly as the US mid-term elections approach. By the second half of next year, Citi suggests gold prices could retract further to a range of $2,500-$2,700 per ounce. However, a bullish scenario where gold exceeds $3,500 per ounce in Q3 remains possible if investment and hedging demand strengthen due to persistent US economic and geopolitical instability. Conversely, an easing of geopolitical risks, successful tariff agreements by Trump, and positive US economic indicators could push prices below $3,000. Emerging market central bank purchasing activity is noted as a potential supporting factor for gold prices amidst these scenarios. The overall sentiment signal for gold (GLD) is strongly negative at -0.8, aligning with Citi's bearish perspective.

Key Decisions for Investors

• Investors should consider the potential for weakening gold prices in the medium term, as forecast by Citi, and evaluate their current gold allocations accordingly, potentially reducing exposure or implementing hedging strategies.
• Monitor key catalysts closely, including developments in US politics such as Trump's tariff policies and the upcoming mid-term elections, shifts in geopolitical tensions, and US economic performance indicators, as these factors are expected to significantly influence gold's price trajectory.
• Factor in the potential for continued gold purchases by emerging market central banks, which could provide a degree of price support or temper the extent of the forecasted decline, offering potential entry points if prices fall significantly.