A bear tosses a towel
In recent news, financial services giant Citi has revised its gold price forecast, predicting a significant increase in the near future. The bank now expects gold prices to reach as high as $3,500 per ounce, a notable upward revision from its previous forecast of $3,300.
This bullish prediction is driven by a deteriorating U.S. economic outlook. July non-farm payroll gains were weak, and recent data revisions show slowed job growth, increasing concerns about recession or economic contraction. Additionally, tariff inflation pressures, as a result of recent tariffs imposed by the U.S. on trading partners, are intensifying inflation concerns.
The declining U.S. dollar also plays a role in this forecast. A weaker dollar makes gold priced in dollars cheaper for foreign buyers, supporting higher demand and prices. Furthermore, persistent inflation remains a concern, enhancing gold’s appeal as an inflation hedge.
Robust demand for gold is another key factor. Citi notes that gross gold demand has increased by more than a third since mid-2022, supported by strong investor inflows, steady central bank buying, and surprisingly resilient jewelry demand despite record prices.
The increase in global gold demand is driven by strong investment demand, moderate purchases by central banks, and stable jewelry demand despite higher prices. This trend is expected to continue, with mining stocks predicted to have their best phase during this gold rally.
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It's important to note that Citi has also identified three risks that could lead to another gold price surge: a weakening U.S. labor market, doubts about the institutional credibility of the U.S. Federal Reserve and official U.S. statistics, and heightened geopolitical tensions related to the war between Russia and Ukraine.
In conclusion, Citi’s bullish revision reflects a combination of macroeconomic weakness, tariff-driven inflation, and continued high demand for gold as a safe haven against economic uncertainty. As gold prices continue to rise, it remains a promising investment for those seeking to hedge against economic volatility.
Given the deteriorating U.S. economic outlook and the weak job growth indicators, one might consider investing in real-estate as a hedge against potential inflation and economic instability. However, the increasing gold price forecast by Citi, predicting a surge up to $3,500 per ounce, presents an intriguing opportunity for those interested in finance and investing, particularly in gold and silver stocks such as those featured on Goldfolio (ISIN: XC0009655157).
