tradingkey.logo

Citi: Gold investment demand to rise

Investing.comJul 3, 2024 12:52 PM

Citi analysts have introduced a framework for understanding and forecasting gold prices, which they state aims to rejuvenate investment in this asset by providing a robust, regime-independent model.


This framework is said to explain annual price movements over the past 55 years and quarterly changes over the past 25 years, highlighting key drivers of gold prices.


Central to Citi's framework is the idea that investment demand, from both private and public sectors, as a share of gold mine supply, is the primary driver of gold pricing.


According to Citi, "Gold investment demand in China and central banks has risen to 85% of mine supply during 1Q’24 and averaged more than 70% of mine supply over the past two years." This surge in investment demand has counteracted the negative impact of higher US real interest rates, pushing gold prices to record highs.


Citi forecasts that gold investment demand will continue to rise, potentially absorbing almost all mine supply over the next 12-18 months.


This underpins their base case for gold prices to reach $2,700-3,000 per ounce by 2025. The expected normalization of US interest rates, with "8 consecutive Fed cuts starting in September," is anticipated to drive higher ETF demand.


Additionally, continued buying by Chinese and global central banks, fueled by factors like excess savings, weak property markets, and de-dollarization, will support this trend.


Several developments could further bolster gold investment and drive outperformance relative to other asset classes, according to the bank.


These include potential Trump trade tariffs, US fiscal policies aimed at inflating away debt, and geopolitical tensions such as conflicts in the Middle East. However, Citi notes that risks to their bullish forecast include weaker-than-expected China retail demand, reduced central bank demand, or delays in Fed interest rate cuts.

Disclaimer: The content of this article solely represents the author's personal opinions and does not reflect the official stance of Tradingkey. It should not be considered as investment advice. The article is intended for reference purposes only, and readers should not base any investment decisions solely on its content. Tradingkey bears no responsibility for any trading outcomes resulting from reliance on this article. Furthermore, Tradingkey cannot guarantee the accuracy of the article's content. Before making any investment decisions, it is advisable to consult an independent financial advisor to fully understand the associated risks.

Related Instruments

Recommended Articles

tradingkey.logo
tradingkey.logo
Intraday Data provided by Refinitiv and subject to terms of use. Historical and current end-of-day data provided by Refinitiv. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.
* References, analysis, and trading strategies are provided by the third-party provider, Trading Central, and the point of view is based on the independent assessment and judgement of the analyst, without considering the investment objectives and financial situation of the investors.
Risk Warning: Our Website and Mobile App provides only general information on certain investment products. Finsights does not provide, and the provision of such information must not be construed as Finsights providing, financial advice or recommendation for any investment product.
Investment products are subject to significant investment risks, including the possible loss of the principal amount invested and may not be suitable for everyone. Past performance of investment products is not indicative of their future performance.
Finsights may allow third party advertisers or affiliates to place or deliver advertisements on our Website or Mobile App or any part thereof and may be compensated by them based on your interaction with the advertisements.
© Copyright: FINSIGHTS MEDIA PTE. LTD. All Rights Reserved.