Citi updates gold price forecast to $3,000 by year-end

Gold price poised for fifth week of gains as Iran downplays Israel strike

Gold prices rose on Friday and were poised for a fifth week of gains, as investors flocked to the safe-haven asset as escalating tensions between Israel and Iran fuelled fears of a wider conflict in the Middle East.

The spot gold price was up 0.1% at $2,380.68 per ounce as of 1040 GMT, after rising as high as $2,417.59 earlier in the session. Gold is up over 1% this week, and market analysts suggest there may be further gains ahead.

In a note dated April 15 and cited by CNBC, Citi wrote:

“The recent gold rally has been aided by geopolitical heat and is coinciding with record equity index levels”.

The comment was notably issued at the start of week. As of premarket hours on Friday, the S&P 500 index was on track for a 3.6% weekly loss, while the Dow Jones index is poised for a smaller loss of 1.8%.

The demand for gold increased following a significant escalation in Middle East tensions when Iran launched over 300 drones and missiles at Israel last weekend, most of which were intercepted by Israel's Iron Dome defense system.

Explosions then echoed over an Iranian city on Friday in what Reuters-cited sources described as an Israeli attack, but Tehran played down the incident and indicated it had no plans for retaliation.

Gold, traditionally seen as a hedge against inflation and economic uncertainty, tends to rise as investors shift away from riskier assets like stocks during turbulent times.

The price of bullion reached a new record intraday high of $2,448.80 per ounce last Friday, in anticipation of the Iranian attack.

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Gold price surges by over 15% this year on geopolitical uncertainty, rate cut expectations

Since the beginning of the year, spot gold prices have surged more than 15% due to various factors including ongoing geopolitical conflicts and anticipation of interest rate cuts by the U.S. Federal Reserve.

Gold prices typically move inversely to interest rates. With falling interest rates, gold becomes more attractive compared to fixed-income assets like bonds, which offer lower returns.

Citi updates year-end gold price forecast to $3,000, Goldman sees yellow metal at $2,700

Despite hotter-than-expected CPI inflation data in March delaying market expectations for a rate cut until September, with only two cuts now anticipated instead of three, analysts remain optimistic about gold's future prospects due to persistent physical demand — particularly from China — and its status as a geopolitical hedge.

“We project $3,000/oz gold over the next 6-18m,” said Citi’s analysts led by Aakash Doshi, Citi’s North America head of commodities research.

The financial gold “price floor” has also moved higher from around $1,000 to $2,000 per ounce, Citi said.

At the end of last week, Goldman Sachs labeled gold as an "unshakeable bull market," revising its end-of-year gold price forecast from $2,300 per ounce to $2,700.

A gold price forecast from Commerzbank said the yellow metal may end the year at $2,300 compared with $2,200 previously — although the bank remains skceptical about the further upside potential as gold's rise runs counter to the trend in U.S. rate expectations.