Gold prices have surged to unprecedented levels, recently breaking through Citi Research’s target of US$3,500 per ounce, according to a research report published by the investment bank. The sharp rally, which saw gold prices hit all-time highs in late April, was largely attributed to heightened concerns over global trade tariffs, prompting a rush into safe-haven assets.
However, Citi now anticipates that gold prices may enter a phase of consolidation as developments in U.S.-China trade negotiations alleviate some of the market’s worst fears. The easing of tariff tensions, which had been a primary catalyst for gold’s rapid ascent, is expected to reduce the urgency of haven-driven buying in the near term.
Key Resistance Factors to Further Gains
While Citi acknowledges the bullish factors that have propelled gold prices to record highs, the report also outlines several elements that could act as headwinds for further upside momentum.
One of the primary concerns is the record global allocation of wealth to gold, which has reached historic highs as investors seek safety amid geopolitical and economic uncertainties. This significant accumulation could temper future demand, especially if macroeconomic risks begin to subside.
Additionally, central banks have been expanding gold’s share in their foreign exchange reserves, a trend that has provided strong support to gold prices over the past few years. However, with these reserves already at elevated levels, the pace of accumulation may slow, removing a key pillar of demand.
On the consumer side, Citi notes a continued decline in jewelry demand, particularly from major markets such as China and India, where high gold prices have dampened purchasing appetite. This weakness in physical demand adds further weight to the argument that gold may struggle to sustain its upward trajectory.
Moreover, the report highlights the potential for an increase in scrap gold supply, as higher prices incentivize recycling and the liquidation of existing holdings. This additional supply could exert downward pressure on prices, further supporting Citi’s view of a likely consolidation phase.
Outlook: Stabilization Expected, but Long-Term Fundamentals Remain Supportive
Despite forecasting a period of price stabilization, Citi maintains a constructive long-term outlook for gold. Persistent macroeconomic uncertainties, including the trajectory of global inflation, central bank monetary policies, and geopolitical tensions, are expected to keep gold well-supported over time.
The investment bank also emphasized that gold’s role as a portfolio diversifier and store of value remains intact, particularly in an environment where investors are increasingly seeking hedges against economic volatility and currency depreciation.
Nonetheless, Citi cautioned that without fresh catalysts, such as a significant escalation in geopolitical risks or a sharp deterioration in economic data, gold prices are likely to trade sideways in the coming months as the market digests recent gains and evaluates the impact of easing trade tensions.
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