As experts from the major US bank Citigroup explained, the price of gold is likely to jump to the $3,000 mark by mid-2025 – provided one of three conditions is met. The analysts also gave an assessment of the oil price.
• Three catalysts for gold prices
• Central banks play a central role
• Oil prices moved by geopolitical conflicts
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Drivers for gold prices at a glance
The price of gold has experienced little movement so far this year. With a current level of 2,047.95 US dollars per troy ounce, the price of the yellow precious metal is hardly breaking cover and has lost 0.72 percent since the beginning of the year (as of March 1, 2024). But this could soon come to an end, as Aakash Doshi, head of raw materials research at the major US bank Citigroup, expects. According to a customer note obtained by CNBC, Doshi and his team assume that the price of gold will rise to $3,000 per ounce by the summer of 2025 if one of three catalysts comes true.
Stagflation is likely to drive investors into gold investments
Experts consider the beginning of stagflation to be the least likely, but not impossible. Not only would the inflation rate increase again, economic growth would also stall and higher unemployment would set in. Because gold continues to maintain its status as a safe haven, investors are more likely to invest in the commodity during times of economic uncertainty rather than riskier investments such as stocks or bonds.
Interest rate cuts due to recession
Citi analysts also consider a “deep global recession” to be rather unlikely, as Doshi explained to the television station. According to experts, a general decline in global economic output would be followed by rapid reductions in interest rates. Since last summer, the US Federal Reserve Bank has kept the key interest rate in the United States between 5.25 and 5.5 percent, and the European Central Bank (ECB) set its last rate in September 2023 Interest rate increase to 4.5 percent. Since then, the monetary authorities have held back and have already announced the first interest rate cuts for the current year. However, the start of a recession could put the central banks under pressure, meaning that rapid and drastic adjustments can be expected, according to Citigroup experts. “That would mean loosening the reins, not to 3 percent, but to 1 percent or less,” Doshi said. Since lower interest rates usually result in a higher gold price – and vice versa, such a reaction from central banks is likely to push the price of the precious metal above the $3,000 threshold.
De-dollarization
The third catalyst identified by Citi analysts is the move away from the US dollar by many central banks. “The most likely wildcard on the path to $3,000 an ounce of gold is a rapid acceleration of an already existing but slow-moving trend: de-dollarization in emerging market central banks, which in turn leads to a crisis of confidence in the U.S. dollar.” , CNBC quotes from the letter. Instead of focusing on the greenback, monetary authorities around the world are likely to increase their purchases of gold, as the bank’s experts predicted. According to data from the World Gold Council, central banks made a net purchase of more than 1,000 tonnes of gold in both 2022 and 2023. “If that number doubles again very quickly to 2,000 tons, we think that would be very positive for gold,” Doshi commented on the trend to CNBC. In addition to de-dollarization, this is supported by the fact that central banks continue to tend to diversify their funds more broadly and want to reduce credit risks.
Slight upward movement even without catalysts
But even if none of the three catalysts mentioned occur, the price of gold is likely to go up – albeit a little more slowly. Citi analysts said the price of the popular commodity will settle at $2,000 an ounce in the first half of the year, according to CNBC. In the second half of the year, the price for one ounce gold bars is expected to rise to $2,150. A new record high is possible at the end of 2024, according to the experts.
Geopolitical conflicts determine oil prices
But the Citi experts not only see a strong performance for the yellow precious metal, the price for black gold is also expected to rise by mid-2025. Doshi and his colleagues expect a price target of $100 per barrel. The experts see drastic cuts in the OPEC+ oil merger, supply interruptions in essential regions and – above all – the boiling up of geopolitical conflicts as the driving force behind the price upswing. While the Ukraine war caused higher oil prices, especially at the beginning, the Middle East conflict has not yet had an impact on oil production or exports. However, attacks by the Houthi rebels on shipping traffic on the Red Sea were noticeable on the oil market. If the conflicts mentioned escalate, this is likely to at least hinder oil supplies and thus drive up the price of the fossil fuel, according to Citigroup experts.
Editorial team finanzen.net
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