Gold prices could fall by 20%: Here we decode why
What's the story
Citigroup has revised its gold price forecast, cutting the three-month target from $4,300 to $4,000 per ounce. The revision is based on improving macroeconomic conditions and declining demand for safe-haven assets. The bank's commodities strategists said the immediate upside for gold looks limited due to stabilizing real yields, a stronger US dollar and reduced geopolitical tensions.
Market analysis
Central bank purchases and ETF inflows decline
Citi's analysts have also noted a decline in central bank purchases and ETF inflows in recent weeks. The revised forecast comes after a major turnaround from the bank's earlier prediction. In January, Citi had raised its three-month gold target to $5,000 per ounce due to increased geopolitical risks and tight physical market conditions. Now, they warn that gold prices could fall further in the coming months, possibly even hitting $3,500 per ounce, almost 20% lower than current levels.
Market dynamics
Negative short-term risks
Citi has identified uncertainty over the Strait of Hormuz, high energy prices, and changing central bank demand as key factors influencing the gold market. The bank believes higher real rates and reduced demand for safe-haven assets could further pressure prices in the near term. "The skew of risks in the short term looks negative," Citi said, adding that buying gold on dips now requires confidence that geopolitical tensions won't flare up again.
Future prospects
Long-term optimism for gold
Despite its near-term caution, Citi remains optimistic about gold in the long run. The bank has maintained its six-to-12-month target at $4,500 per ounce with more upside possible if economic growth slows sharply or inflation picks up again. Citi also reiterated its belief that silver could outperform gold in this precious metals cycle, while industrial metals like copper and aluminum could perform better in H2 2026 as investors focus on global growth and infrastructure demand.