According to Citi, the shift in gold ETF flows will be a crucial driver of higher gold prices in 2025.
After a prolonged period of destocking, Citi analysts expect a significant turnaround in the physically backed gold ETF market, which has historically played a crucial role in driving gold bull markets.
In their recent note, Citi highlights that the multi-year cycle of gold ETF outflows, which saw the loss of approximately 930 tonnes of precious metal between November 2020 and May 2024, has likely reached an end.
The analysts predict a turnaround, with gold ETFs expected to contribute 275 tons of net demand by 2025, compared to net sales of 250 tons in 2023. This swing represents a substantial shift in gold market dynamics.
Citi emphasizes that gold ETF inflows are key to pushing prices higher, especially as other factors such as Chinese gold consumption slow and may moderate official sector buying in the second half of 2024.
The analysts argue that this renewed interest in gold ETFs could push prices to $3,000 per ounce by mid-2025, supported by factors such as possible Fed rate cuts, increased risks of a US recession and increased market volatility.
Historically, robust inflows into gold ETFs have been a hallmark of previous gold bull markets, including the post-financial crisis rally and the 2019-2020 price surge.
Citi predicts that the share of ETF demand in gold mine supply will increase from 1% in 2024 to 7-7.5% in 2025. This increase, although modest compared to other demand components such as jewelry or official sector purchases , marks a significant change in the market. , with gold ETFs poised to absorb rather than deliver physical shares.
Citi’s analysis highlights the importance of ETF flows as a key factor in the expected rise in gold prices, suggesting that a substantial bull market could take place in the coming period, driven by this renewed investment interest.
