Citi trims gold prices target as markets digest U.S. tariffs and geopolitics

Citi has lowered its near- and medium-term gold price targets, projecting $3,300 per ounce in the next three months (previously $3,500) and $2,800 per ounce in 6-12 months (previously $3,000), citing a peaking market deficit and potential decline in investment demand. While acknowledging short-term strength, Citi suggests the late April peak around $3,500 may have marked the cycle's top, with a base-case scenario of prices falling below $3,000 by late 2025/early 2026 due to waning investor demand, though geopolitical risks and stagflation fears could trigger a renewed surge.

Analysis

Citigroup has revised its gold price forecasts downwards, projecting $3,300 per ounce over the next three months, a reduction from its previous $3,500 estimate, and has lowered its 6-12 month target to $2,800 per ounce from $3,000. This adjustment is attributed to an anticipated peak in the gold market deficit and a potential decline in investment demand. Citi analysts foresee gold prices consolidating in a range of $3,100-$3,500 per ounce in the upcoming quarter, influenced by the market's digestion of U.S. tariff policy changes, persistent high geopolitical risks, and elevated U.S. budget and growth concerns. Crucially, Citi suggests that the late April peak near $3,500 per ounce may have marked the zenith of the current gold cycle. The firm's base-case scenario, assigned a 60% probability, projects gold falling below $3,000 per ounce by late 2025 or early 2026 as investment demand wanes, potentially starting from the fourth quarter of 2025, contingent on even modest improvements in global growth confidence. A bull case (20% probability) could emerge from tariff or geopolitical re-escalation or stagflation fears, while a bear case might see gold slip below $3,000 with rapid conflict resolutions and sustained U.S. economic strength. Notwithstanding the cautious stance, historically elevated investment demand relative to mine supply is noted as a factor that could support prices even in weaker scenarios.

Key Decisions for Investors

• Investors should re-evaluate current gold allocations considering Citi's lowered price targets and the rationale of a peaking market deficit and potential decline in investment demand, suggesting the recent $3,500/oz level may have been the cyclical high.
• Consider adjusting gold exposure to reflect Citi's base-case scenario (60% probability) of prices falling below $3,000/oz by late 2025/early 2026, potentially by reducing long positions or exploring tactical short opportunities if conviction aligns.
• Monitor key macroeconomic and geopolitical indicators closely, including U.S. tariff policy developments, geopolitical tensions, global growth confidence, and U.S. economic data, as these will be critical determinants for Citi's bull or bear case scenarios for gold.
• Acknowledge that while the primary outlook is cautious, the existing high level of investment demand relative to mine supply could provide some price support, potentially moderating the pace or depth of any decline in the near-to-medium term.