CNBC reports that Citi Research predicts three potential catalysts for a surge in gold prices, potentially reaching $3,000 an ounce within 12-18 months. Aakash Doshi, Citi’s Head of North American commodities research, identifies these catalysts as a rapid increase in central bank gold purchases, stagflation, or a severe global recession.
Firstly, CNBC highlights Doshi’s view that a massive escalation in central bank gold purchases could lead to a crisis of investor confidence in the U.S. dollar, significantly driving up gold prices. To put this in context, central banks are increasingly diversifying with heightened gold purchases in recent years, according to Citi. Doshi points out that doubling their current buying amounts would challenge jewelry as the leading driver of gold demand.
CNBC emphasizes the second catalyst Doshi cites, which is a severe global recession triggering drastic interest rate cuts by the Federal Reserve. While seen as a low-probability scenario, such a dramatic rate drop would favor gold investment over lower-yield fixed-income assets. Investors often flock to gold’s perceived safe-haven status during turbulent periods, which aligns with this potential driver.
Thirdly, Citi identifies stagflation – high inflation, stagnating growth, and job losses – as another improbable but impactful trigger for heightened gold prices. Gold generally rises in value during stagflation, reflecting its tendency to outperform riskier assets in unfavorable economic climates.
Beyond these catalyst-driven spikes, CNBC relays Citi’s baseline prediction for gold prices to average slightly above $2,000 in the first half of 2024. Doshi expects sustained momentum, perhaps leading to a record high for gold before the end of 2024. Doshi stresses that although these scenarios carry potential, market complexities make long-term prediction challenging.
The report also mentions Citi’s outlook for oil, with forecasts of prices potentially breaching $100 a barrel. Doshi identifies several triggers for this, including worsening geopolitical tensions, heightened OPEC+ production cuts, and supply shocks in key oil-producing countries. However, Doshi emphasizes that Citi’s primary view on oil remains an average of roughly $75 per barrel for the year.
