Softening Physical Gold Demand in Second Quarter
Citi analysts noted that physical gold demand likely softened in the second quarter compared to the first, although it was still off a strong base. This trend is indicative of a shift in the market dynamics, with potential implications for gold prices.
Potential Record Price Range in Second Half of 2024
Despite the softening demand, underlying gold consumption growth is still trending positively for 2024. This trend could potentially drive spot trading towards a record average price range of $2,400-$2,600 per ounce in the second half of the year. Financial investors may play catch-up, leading to increased price volatility in the market.
Chinese Gold Imports and Consumption
Non-monetary gold imports into China decreased in the second quarter compared to the first quarter, but Citi continues to project a record amount of onshore bullion imports for 2024. The significant rise in Chinese retail gold imports could reshape the global gold market, with China potentially representing a larger share of world gold mine output.
Stabilized Official Sector Gold Demand
Official sector gold demand has stabilized at a high percentage of gold mine production since 2022. The potential for this demand to increase further in a bullish scenario signals growing concerns about global economic uncertainties and geopolitical tensions. Central banks may continue to increase their gold reserves as a hedge against market volatility.
Positive Outlook for Gold ETFs
Inflows into gold exchange-traded funds (ETFs) are expected to improve in the second half of the year, especially as the Federal Reserve begins its rate-cutting cycle. This could attract investors looking for safe-haven assets amid uncertain market conditions.
Long-Term Price Targets
Citi analysts remain constructive on gold physical uptake over the next 12 months, citing factors such as a potential Fed cutting cycle and US labor market challenges. Their base case price targets for gold are $2,800-$3,000 per ounce by mid-2025, reflecting a positive outlook for the precious metal in the medium to long term.
