Citi Analysts: Central Bank Demand Could Push Prices to $3,000

Central bank gold demand has slowed in recent months after record purchases at the start of the year; however, some analysts remain optimistic that this pillar of the market will be stronger than ever in 2024.

Despite gold’s current consolidation phase, in a report published Wednesday, commodity analysts at Citi said solid gold demand in the second half of the year could drive prices as high as $2,600 an ounce, with investors playing catch-up with the broader marketplace.

Along with renewed investor interest, the analysts said they expect central bank demand to hit another record this year. According to their modeling, the analysts expect central banks to buy around 1,100 tons this year, a 5.8% year-on-year increase, with the possibility of exceeding 1,250 tons in a bullish scenario.

Citi’s outlook comes after foreign reserve data from the People’s Bank of China showed it didn’t add to its gold reserves for a second straight month.

Despite this shift, the analysts noted that official sector gold demand has stabilized at a record 28-30% of gold mine production since 2022. They added that they see demand potentially increasing towards 35% in a bull case scenario over the next year due to trade wars and concerns about U.S. fiscal policies.

While the gold market remains well supported by central bank demand, Citi also expects to see further growth among retail consumers and investors.

"We remain constructive on gold physical uptake over the next 12 months with a potential Fed cutting cycle and U.S. labor market headwinds buttressing paper demand for the yellow metal," the Citi analysts wrote.

In this environment, the bank sees gold prices trading between $2,800 and $3,000 per ounce by mid-2025.

This article originally appeared on Kitco News.