Investing.com — Despite a mixed demand landscape, with official sector and OTC investments performing well while China and jewelry markets lag, Citi Global Research remains confidently bullish on prices. The brokerage expects gold prices to continue their upward trajectory, with a target of $2,500 per ounce in the near term and $3,000 per ounce over the next twelve months.
Demand dynamics:
Official sector purchases: Central bank gold demand remains robust despite a recent lull in reported purchases by the People’s Bank of China (PBOC).
Citi expects a continued upward trend in official sector gold inventories due to de-dollarization and reserve diversification, forecasting healthy demand of 941 tonnes in 2024.
OTC and ETFs: OTC demand has soared, rising more than 50% year-on-year in the second quarter of 2024, pushing total gold consumption to a seasonal record. Bullion ETF outflows, which have been consistent for years, began to reverse in late Q2 2024, with net inflows picking up in July.
Citi expects net inflows of 50 tons for 2024 and 275 tons for 2025, indicating a strengthening trend in gold demand among investors.
China and jewelry: On the other hand, demand for gold in China and the jewelry sector has declined. Chinese retail demand is expected to remain weak in the third quarter before possibly rebounding later this year.
Demand for jewelry, which is heavily affected by high prices and inflationary pressures, has fallen sharply. The projections for 2024 indicate a decline of 9.5% year-on-year.
Investment demand and market trends:
According to analysts, the outlook for the gold price remains positive due to the expected increase in demand for physical investments in 2024 and 2025, to 83% and 85% respectively.
This increased level of investment demand is reminiscent of previous bullish phases in the gold market, and supports the projection that gold prices will reach $3,000 per ounce over the next twelve months.
The brokerage also notes that changing gold market dynamics – driven by resilient central bank buying, robust OTC demand and a potential reversal in ETF flows – could soften the impact of weaker retail and jewelry demand .
