Gold's Golden Moment: Is the Correction Already Brewing?

The price of gold has been a barometer of global uncertainty for decades. Yet today, as geopolitical tensions and economic volatility linger, Citigroup's recent forecast offers a stark warning: a correction in gold prices could begin as early as late 2025, with implications for investors who've bet on the metal as a safe haven. Let's dissect Citi's analysis and what it means for your portfolio.

Citi's Forecast: The Path to Lower Gold Prices

Citi's base-case scenario (60% probability) projects gold prices will consolidate above $3,000 through 2024 but begin a gradual decline in 2025. By late 2026, prices could fall to $2,500–$2,700 per ounce. For June 2025 specifically, the bank anticipates prices will remain near $3,000, though investment demand is expected to weaken by Q4 2025 as global growth confidence improves and geopolitical risks ease.

The bear case (20% probability) envisions a sharper decline if trade tensions resolve and central banks like China's halt their gold purchases—a trend already underway. Conversely, a geopolitical shock (bull case, 20% probability) could push gold to new highs, but this hinges on extreme tail risks like a U.S.-China tariff war escalation.

Why the Decline? Four Key Drivers

1. Waning Investment Demand
   Citi highlights that investor sentiment is shifting as markets price in improved macroeconomic stability. Central banks, notably China, have already slowed their gold accumulation—a critical pillar of recent price support. With $3,000+ gold prices, institutional buyers may pause until the next catalyst emerges.

2. Fed Policy and Rate Cuts

The Federal Reserve's expected rate cuts by late 2024 signal reduced inflationary pressures, diminishing gold's role as an inflation hedge. While gold's inverse relationship with the dollar has weakened, Fed easing will still reduce perceived urgency for safe-haven assets.

1. Geopolitical Pivot Points
   The 2024 U.S. elections and 2025 policy outcomes (e.g., the “Big Beautiful Bill”) could ease trade tensions. If geopolitical risks abate, capital will flow back into risk-on assets like equities, sidelining gold.

2. Supply and Market Dynamics
   Gold's supply deficit—driven by stagnant mine production and soaring demand—is set to peak by late 2024. As the deficit eases, upward price pressure will fade. Meanwhile, investment demand as a share of mine supply remains historically high, leaving little room for further gains.

Risks to the Forecast

• Black-Swan Events: A new conflict or trade war could ignite safe-haven demand.
• Central Bank Buying: If India or Uzbekistan resume aggressive purchases, gold could defy the trend.
• Fed Policy Miscalculations: Overly hawkish Fed actions could delay the correction, but Citi deems this unlikely.

Investment Implications: Time to Rebalance?

For long-term investors, the path is clear: take partial profits now. The $3,000+ price tag is already pricing in much of the current geopolitical and inflationary risk. By mid-2025, holding gold as a “just-in-case” hedge may become overexposed to the coming correction.

For contrarian traders, wait for the correction to unfold. If prices dip below $3,000 by late 2025, consider dollar-cost averaging into gold ETFs (e.g., GLD) or mining stocks (e.g., GDX). But monitor geopolitical developments closely—any escalation could create a buying opportunity.

Hedgers should diversify: Pair gold exposure with inflation-linked bonds (TIPS) or currencies in volatile regions (e.g., TRY, COP). This balances safe-haven demand with macroeconomic hedges.

Final Take: A Gold Crossroads

Citi's forecast paints a clear picture: gold's run is entering its final lap. While $3,000 remains psychologically sticky for June 2025, the structural headwinds—waning demand, Fed easing, and geopolitical resolution—are already in motion. Investors must decide: ride the correction or position for the next phase of market dynamics. The window to act is narrowing—and so is gold's glow.

Watch this ratio closely; a sustained dip below $3,000 could signal the start of a prolonged downtrend.