Citi increased its three-month gold price forecast to $3,500 per ounce from $3,300 on Monday, citing a deteriorated near-term outlook for US growth and inflation.
The expected trading range has also been adjusted to $3,300–$3,600 per ounce, up from $3,100–$3,500 per ounce, according to a Reuters report.
Trade war concerns
The bank anticipates that elevated concerns regarding US growth and tariff-related inflation will persist through the second half of 2025. This, coupled with a weaker dollar, is expected to moderately boost gold prices to new record highs.
Last week, the administration of US President Donald Trump initiated a significant shift in global trade policy by imposing substantial tariffs on a wide range of imported goods.
These tariffs, aimed at protecting domestic industries and rebalancing trade relationships, impacted exports from numerous key trading partners.
Among the affected nations were Canada, a crucial neighbor and long-standing ally; Brazil, a major South American economy; India, a rapidly growing Asian market; and Taiwan, a significant player in the global technology supply chain.
The imposition of these tariffs has sparked considerable debate and concern across international markets.
Trading partners have voiced strong objections, with many threatening retaliatory measures, raising fears of potential trade wars.
Trade Representative Jamieson Greer stated on CBS’s “Face the Nation” on Sunday that the tariffs enacted last week on numerous countries are expected to remain, rather than be reduced during ongoing negotiations.
Rate cut expectations
Meanwhile, in a significant turn of events last week, the US dollar experienced a notable weakening, primarily influenced by the latest nonfarm payrolls report.
The report indicated a modest increase of 73,000 jobs last month, a figure that followed a downwardly revised gain of just 14,000 jobs in June.
This unexpected slowdown in job growth has injected fresh optimism into financial markets regarding the Federal Reserve’s monetary policy trajectory.
Specifically, the softer-than-expected jobs data has intensified speculation about a potential interest rate cut by the Federal Reserve as early as September.
Market participants are now actively recalibrating their expectations, with the CME FedWatch tool, a widely used indicator of market sentiment on Fed policy, reflecting an 81% probability of a rate cut.
This surging likelihood suggests that investors are increasingly convinced the Fed will opt for a more accommodative stance to support economic growth in light of the cooling labor market.
Lower interest rates boost demand for gold as it reduces the opportunity cost of holding the precious metal.
Citi further notes a weakening of US labor data in the second quarter of 2025, alongside growing concerns about the institutional credibility of both the Fed and US statistics, and continued elevated geopolitical risks stemming from the Russia-Ukraine conflict.
Since mid-2022, gross gold demand has increased by over a third, leading Citi to project a near doubling of prices by the second quarter of 2025.
Gold demand was robust, fueled by strong investment activity, moderate central bank purchases, and consistent jewelry demand, even in the face of elevated prices, the bank noted.
At the time of writing, the December gold contract on COMEX was at $3,410.65 an ounce, up 0.3% from the previous close.
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