Gold is back in demand! The yellow metal continues to be highly sought after by investors, serving as a reliable safe-haven asset. Against this background, Citigroup experts have unveiled a gold price forecasting model that could attract significant investment in this asset thanks to its reliable and independent framework.
This model explains annual changes in gold prices over the past 55 years and quarterly price movements over the past 25 years. It also helps identify the key factors that determine the value of the precious metal.
At the heart of the bank's model is investment demand for gold from both private and public sectors. According to Citi, gold investment demand from China and central banks soared to 85% of mine supply in the first quarter of 2024 and averaged more than 70% of mine supply over the past two years. This surge in investment demand has mitigated the negative impact of rising real interest rates in the United States, driving gold prices to record highs, Citigroup noted.
Analysts estimate that investment demand for the precious metal will continue to grow and is likely to absorb almost all mine supply over the next 12-18 months.
This conclusion is in line with Citigroup's base scenario, which projects that gold prices could reach $2,700–$3,000 per ounce by 2025. Experts also expect monetary policy in the US to normalize by September after eight consecutive interest rate cuts, which is supposed to boost demand for ETFs.
Citigroup believes that this bullish trend will be fueled by continued gold buying by Chinese and global central banks. According to experts, excess savings, weak housing markets, and de-dollarization could enhance the metal's attractiveness relative to other asset classes.
