5 days ago
Gold prices are soaring again. Here's why a new record could be right around the corner.
Gold prices could touch a new record in the next three months, driven by a worsening trajectory for U.S. growth and inflation, Federal Reserve independence concerns and a weaker dollar.
That's according to a team of Citi analysts led by Maximillan Layton, who bumped their near-term price forecast (0 to 3 months) to $3,500 an ounce from $3,300 an ounce. Their expected range for gold over the next three months was lifted to between $3,300 and $3,600 an ounce, from $3,100 to $3,500.
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Gold prices are soaring again. Here's why a new record could be right around the corner.
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Gold prices GC00 were powering higher on Monday, up $36.80, or 1%, to $3,436.10 an ounce. Part of that driver was rising expectations that the Federal Reserve could cut interest rates at its September meeting following last week's weaker-than-expected jobs data.
Those new Citi targets would mean a fresh record for the precious metal, which has gained nearly 30% this year. Gold briefly set a new intraday record high of $3,500 on April 22, based on a continuous contract basis, and a record settlement price of $3,452.80 was reached on June 13.
Gold's march to new highs stalled this summer, with some finger-pointing at a slowdown of central bank buying. Still, Citi sees plenty of reasons why that march to new highs can resume.
'U.S. growth and tariff-related inflation concerns are set to remain elevated during 2H'25 [second half of 2025], which alongside a weaker dollar, are set to drive gold moderately higher, to new all-time highs,' said Layton and his colleagues. The ICE U.S. Dollar Index DXY has lost nearly 9% this year. At the end of June, the dollar marked its worst first-half since at least the early 1970s.
They noted that U.S. tariffs on trading partners are coming in higher than expected, with many deals at 15% and some well north of that — Switzerland was hit with a surprising 39% levy last week. While most of that revenue will ultimately be redistributed via tax rebates and the net impact of President Donald Trump's One Big Beautiful Bill Act, that will take time, possibly not being fully felt until 2025, the Citi analysts said.
'Further, these tariffs will likely be (temporarily) inflationary for the U.S. in the near term. We have also seen weaker labor market data during [the second quarter of 2025], institutional credibility concerns have increased regarding the Fed and U.S. statistics, and geopolitical risks are presently elevated related to Russia/Ukraine,' the analysts said.
Markets were hit with a double whammy of higher tariffs on several U.S. trading partners late last week and weaker-than-expected jobs data, leading to Trump's firing of Bureau of Labor Statistics Commissioner Erika McEntarfer on Friday.
On Sunday, Trump said he would be announcing a replacement for both McEntarfer, as well as a new Fed governor after Adriana Kugler stepped down Friday. Trump has been highly critical of Fed Chair Jerome Powell for not cutting interest rates, and some believe his agenda could be boosted by a new governor, who is a permanent voting member of the rate-setting Federal Open Market Committee.
Investors ratcheted up expectations for a Federal Reserve interest-rate cut on Friday after the jobs data, with Fed-funds futures indicating a 85.5% probability of a September cut on Monday, according to the CME FedWatch Tool.
Lower interest rates make it cheaper for investors to hold gold as it's non-interest-bearing, compared to other assets.
Gold surged 1.5% to $3,399.80 an ounce on Friday, its best one-day percentage gain since June 12, according to FactSet.
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