Gold takes a breather on Tuesday after rising to record highs over the past two weeks, as safe-haven demand remained underpinned by concerns over worsening geopolitical tensions, and Citi believes $3,000 an ounce could be reached.
Spot gold is down 0.5 per cent at $2,370.27 per ounce, holding near Friday's record high of $2,431.53 per ounce.
The recent rise in the precious metal was largely due to worsening geopolitical tensions in the Middle East, after Iran attacked Israel over the weekend.
An all-out war between the two countries could draw in other Middle Eastern powers, as well as the United States and its allies.
Fear of such a scenario has fuelled demand for gold, traditionally considered a safe haven because of its relative price stability, especially in times of global conflict.
The precious metal has also been supported by central bank purchases over the past year, especially in emerging markets, amid growing fears of a global economic recession in 2024.
‘Gold's recent rally has been helped by geopolitical heat and coincides with record levels in equity indices; therefore, an environment of heightened risk aversion should further boost prices,’ Citi analysts said in a note dated 15 April.
‘More importantly, the bullion complex has decoupled from interest rates and the US dollar, suggesting that the market is supported by strong physical consumption factors (e.g. imports from India and China, bullion and coins), alternative metals demand, geopolitical hedging and central bank buying.’
The bank has raised its gold price benchmark forecast to the bullish scenario, and by 2024 this implies a 6.8% increase to $2,350 per ounce; estimated for 2025, this is an upward revision of 40% to $2,875 per ounce.
"We project $3,000 per ounce gold for the next 6-18 months, which is 20% above futures and more than 25% above the spot price. We expect the price to regularly test and exceed $2,500 per ounce in the second half of 2004", the bank adds.