Gold Physical Investment Demand to Surge in 2024 and Beyond, Citi Strategists Predict
In a recent note, Citi strategists forecast a significant increase in gold physical investment demand in the coming years. They maintained their price targets of $2,500/oz for the next 0-3 months and $3,000/oz for the next 12 months, with average quarterly prices expected to trend higher. The estimated baseline trading range for 2025 is set to be between $2,800-$3,000/oz.
According to Citi, factors such as official sector purchases, over-the-counter (OTC) and ETF investment demand, and gold-stimulative Indian tax policy are expected to offset challenges faced by bullion consumption growth from other channels. The strategists also noted a reversal of the multi-year bullion ETF de-stocking trend, which could lead to increased investor demand amid a potential Fed cutting cycle.
The report projects a significant increase in gold physical investment demand as a share of mine supply, reaching 83% in 2024 and 85% in 2025. This would mark the highest share of gold investment demand since 2020, when gold prices rallied significantly. Central bank gold demand is also expected to remain robust, despite a recent absence of reported purchases by the People's Bank of China.
Citi revised down its estimate for central bank gold demand in 2024, but still expects strong figures. The report also highlighted a decline in gold bar and coin demand in the second quarter of 2024, driven by weak flows from Western markets. Factors such as record equity markets, low volatility, and a strong U.S. dollar environment likely played a role in deterring purchases in North America.
Overall, the forecast suggests a bullish outlook for gold investment demand, with potential support from central bank purchases and investor sentiment. Investors may want to keep an eye on these trends and consider incorporating gold into their portfolios for potential growth and diversification benefits.