Citigroup "flips to bullish"? Raises gold price target, stating that concerns over the economy and inflation are rising, and gold prices will reach new highs

As concerns about the U.S. economy and inflation rise, Citigroup overturns its previous pessimistic forecast and significantly raises its gold price target.

On Monday, Citigroup released a report, raising its gold price target for the next three months from $3,300 per ounce to $3,500, and adjusting the trading range from $3,100-$3,500 to $3,300-$3,600.

The report believes that the deteriorating outlook for the U.S. economy and rising inflation concerns will drive gold prices to new highs, contrasting sharply with its previous bearish expectations.

The U.S. economic growth and tariff-related inflation concerns will continue to intensify in the second half of 2025, which, combined with a weakening dollar, will moderately push gold prices to historical highs.

Last week's U.S. non-farm payroll data showed weak performance, with only 73,000 jobs added in July, far below expectations, and the data for the previous two months was also revised down by nearly 260,000. The weak employment data has reignited market expectations for a rate cut by the Federal Reserve in September, with the CME FedWatch tool currently indicating an 81% probability of a rate cut in September.

Deteriorating U.S. Economic Outlook and Inflation Concerns Drive Dual Forces

Citigroup's change in perspective primarily stems from a reassessment of the U.S. economic outlook.

The bank specifically highlighted the weak performance of the U.S. job market in the second quarter of 2025, as well as rising concerns about the credibility of the Federal Reserve and U.S. statistical data. Additionally, ongoing geopolitical risks such as the Russia-Ukraine conflict have further enhanced the appeal of gold as a safe-haven asset.

The high tariffs imposed by the Trump administration on several trading partner countries last week have become another important factor driving Citigroup's upward revision of gold price expectations.

According to CCTV News, U.S. Trade Representative Robert Lighthizer stated on Sunday that the new round of tariffs imposed by President Trump on multiple countries "is basically set" and will not be adjusted in the current negotiations, including a 35% tariff on goods imported from Canada, a 50% tariff on Brazil, a 25% tariff on India, and a 39% tariff on Switzerland.

Strong Growth in Gold Demand

Citigroup pointed out that total gold demand has increased by more than one-third since mid-2022, driving prices to nearly double by the second quarter of 2025.

This strong demand trend is primarily driven by three factors: robust investment demand, moderate central bank purchases, and resilient jewelry demand despite rising prices.

Gold, as a traditional safe-haven asset, typically performs well during times of political and economic uncertainty and tends to be more attractive in a low-interest-rate environment. As expectations for a rate cut by the Federal Reserve rise, the market anticipates further weakening of the dollar, which also provides favorable conditions for rising gold prices.

On Monday during the Asian early trading session, the spot gold price was $3,356.37 per ounce

Will Gold Prices Experience a Reversal?

Citigroup's latest forecast stands in stark contrast to its previous outlook.

In an earlier report, Citigroup had predicted that gold prices would fall below $3,000 per ounce in the coming quarters. At that time, the view was that as global growth confidence improved, Trump's trade policies turned more moderate, and the Federal Reserve shifted its stance from tightening to neutral, the appeal of gold as a safe-haven asset would diminish.

However, the high tariff policies implemented by the Trump administration, a weak U.S. labor market, and escalating geopolitical tensions have led Citigroup analysts to quickly adjust their expectations for gold prices.

This shift from a "bearish to bullish" stance reflects the rapid changes in the global macroeconomic environment and the market's reassessment of inflation risks and economic uncertainties