Citi has increased its gold price forecast, expecting it to reach $3,500 over the next three months. This is an upgrade from their previous forecast of $3,300, with a new trading range of $3,300 to $3,600, up from $3,100 to $3,500.
Citi attributes this adjustment to a weaker US economy and inflation concerns in H2 2025. Alongside a weaker dollar, these factors are predicted to push gold to new all-time highs.
Concerns Over Us Economic Data
There are also worries about the US labour market data from Q2 and concerns over the credibility of institutions like the Fed and BLS. Despite these concerns, investment demand for gold is strong, and moderate central bank purchasing is expected to maintain gold’s favourable position in the market.
We are looking at a bullish stance on gold for the next three months, with a price target of $3,500 and a potential trading range up to $3,600. Derivative traders should consider strategies that profit from a rise in gold prices. This could involve buying call options or establishing bull call spreads with expirations in October or November 2025.
This view is supported by the deteriorating US economic outlook, as the recent Q2 GDP report showed growth slowing to just 0.8%, well below forecasts. We also saw weakness in the second quarter labor market, with the June Non-Farm Payrolls report showing job creation that was significantly lower than the averages we saw in 2024. This slowdown confirms the headwinds facing the American economy.
Impact Of Economic Pressures And Trade Tariffs
At the same time, new trade tariffs are fueling inflation concerns, which was reflected in the July Consumer Price Index rising to 3.9%. This economic pressure is contributing to a weaker US dollar, with the Dollar Index (DXY) falling from around 105 in May to its current level of 101.5. A falling dollar historically makes gold more attractive for foreign buyers.
Underlying demand for gold provides a strong floor for any bullish strategy. The latest reports for Q2 2025 confirmed that central banks, particularly in Asia, continued to be net buyers, adding over 200 tonnes to global reserves. This persistent institutional buying helps absorb any dips in price.
Finally, there are worries surrounding the credibility of the Federal Reserve after its dovish pivot in the July meeting. Some traders feel this was a reaction to political pressure, not just economic data. This kind of uncertainty tends to increase demand for gold as a safe-haven asset.
