Citibank analysts have predicted that gold will pass $2,500 an ounce in the second half of the year and hit $3,000 an ounce within the next six to 18 months.

The forecast comes as the yellow metal’s spot price recently notched an all-time high of $2,431. It surpassed $2,400 again on Friday, but by press time on Monday had dropped significantly, to $2,337 an ounce.

Citibank analysts see the price of gold heading higher later this year; if the Federal Reserve begins another cycle of trimming interest rates, they said, it could be the “bullish kicker” that propels gold to $3,000.

For now, according to the Citibank report, “the bullion complex has decoupled from U.S. rates and the U.S. dollar, suggesting robust physical consumption drivers (e.g., India/China imports, bar/coin), [alternative and fiat currency] demand, geopolitical hedging, and central bank buying are supporting the market.”

Citibank said central bank demand was particularly strong, accounting for 25%-27% of annual gold mine production, with the People’s Bank of China the biggest buyer.

It also said that $1,850 to $2,000 had become gold’s new “price floor” (the global financial crisis of 2007–2009 had established a new floor for gold of $900 to $1,000 an ounce, the report noted).

Goldman Sachs analysts are not ready to go as high as Citibank with gold predictions, but they also don’t think the bull run is over. Last week, Goldman Sachs raised its year-end target to $2,700, from $2,300 earlier this year.

(Photo: Getty Images)

 

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