Citigroup analysts foresee a promising outlook for gold and silver amid a deteriorating U.S. labor market, intensifying geopolitical conflicts, and growing demand from central banks. They suggest that gold, serving as a hedge against declining asset prices, will continue to rise.
Citigroup's report highlights silver's robust prospects, linking its bullish trends to weakening growth sentiment in developed markets and strong demand from the solar and electric vehicle industries. As silver's industrial demand surges, investors are increasing their precious metals allocations.
With fears of future supply shortages, Citigroup has raised its price forecasts for Brent crude in late 2024 and early 2025. However, long-term oil prices are expected to decline due to the rising adoption of electric and new energy vehicles, which reduces oil demand. Additionally, oil supply from non-OPEC+ countries is predicted to increase significantly.
Citigroup's bullish views on precious metals and bearish stance on oil prices remain largely unaffected by U.S. election outcomes. Nevertheless, a Trump victory could introduce tariff uncertainties, potentially impacting silver prices.
Gold price expectations have been adjusted to $2,800 per ounce in 0-3 months and $3,000 per ounce in 6-12 months, marking respective increases of 1.81% and 9.13%. Silver prices are projected at $40 per ounce in 6-12 months, a 15.54% increase. For oil, the average price expectation for 2025 is $60 per barrel, which is 20.61% below current Brent prices.
Despite recent global market consumption downturns and rising long-term U.S. interest rates post the Federal Reserve's rate cuts, gold continues to perform well. Citigroup anticipates gold prices reaching $3,000 per ounce over the next 6-9 months.
The continued interest in gold and its role as a hedge against market risks are underscored by central bank purchases and geopolitical tensions, benefiting gold prices. Investors are willing to pay high prices for gold, while current holders are reluctant to sell.
Citigroup underscores silver's strongest outlook in decades, maintaining a 0-3 month target price at $35 per ounce, with an increase from $38 to $40 per ounce in 6-12 months. Historical patterns show that silver thrives during periods of weakened developed market growth, often coinciding with a weaker dollar and heightened investor interest in precious metals.
Strong silver demand is also driven by sectors related to energy transition, like solar and electric vehicles. Additionally, Federal Reserve rate cuts have incentivized silver investments through vehicles like ETFs.
There exists a significant deficit in silver consumption, necessitating sales from existing silver inventories to meet market demand. Citigroup's model indicates that about 1% of total silver bar and coin inventories need to be sold monthly to satisfy excess demand.
Oil's recent price volatility highlights the clash between weak fundamentals and geopolitical risks. Despite fears of supply shortages prompting an upward revision of Brent crude forecasts to $120 per barrel for late 2024 and early 2025, Citigroup foresees an average price of $60 per barrel in 2025 due to expected surplus conditions and strong supply growth from non-OPEC+ countries, particularly in the Americas.
