Citigroup believes that as geopolitical conflicts intensify, central banks around the world will have strong demand, and gold as a safe-haven asset is expected to rise to $3000 per ounce in the next year. When sentiment weakens in developed markets, silver usually experiences its strongest bull market. Citigroup expects silver prices to rise to $40 per ounce in the next year. Additionally, Citigroup believes that fears of short-term supply shortages may push oil prices up to $120 per barrel.
Citigroup is bullish on gold and silver, bullish on short-term oil prices but bearish on long-term oil prices.
Earlier this week, Citigroup strategist analyst Maximilian J Layton and his team released a report stating that the US labor market is expected to deteriorate further. Gold can hedge against downside risks in asset prices, coupled with strong demand from central banks around the world, escalating geopolitical conflicts. Gold, as a safe-haven asset, will continue to rise.
Silver's outlook is the strongest in decades. Historically, when sentiment weakens in developed markets (DM), silver typically experiences its strongest bull market. In such scenarios, it often signifies a weaker US dollar, increased investor allocation to precious metals, and enhanced industrial demand for silver. In addition, there is strong demand for silver from the cecep solar energy and electric vehicles (EV) industries.
Considering market fears of future supply shortages, Citigroup has raised its price expectations for Brent oil in the fourth quarter of 2024 and the first quarter of 2025. However, Citigroup is bearish on long-term oil prices due to the increasing popularity of electric vehicles and new energy vehicles (NEVs), reducing oil demand, coupled with the potential strong growth in oil supply from non-OPEC+ countries.
Citigroup also stated that the views on being bullish on precious metals and bearish on oil prices under the baseline scenario are largely unaffected by the outcome of the US presidential election. However, a Trump victory could increase tariff uncertainties, posing headwinds to the price of silver.
Citigroup has raised its gold price expectations within 0-3 months from $2,700 per ounce to $2,800 per ounce, a 1.81% increase from the current price; expects gold price within 6-12 months to be $3,000 per ounce, a 9.13% increase from the current price; raised its silver price expectation within 6-12 months from $38 per ounce to $40 per ounce, a 15.54% increase from the current price; the average oil price expectation for 2025 is $60 per barrel, 20.61% lower than the current Brent oil trading price.
The continued prominence of gold's safe-haven and hedging roles is evident.
Citigroup stated that although global consumer demand has been weak in some markets over the past three months, after the Fed cut interest rates in September, long-term interest rates in the United States have risen, but gold's performance remains strong. It is expected that within the next 6-9 months, the price of gold will rise to $3,000 per ounce.
Citigroup expects that the U.S. labor market will further weaken, coupled with the Fed entering a rate-cutting cycle, gold can hedge against the risk of falling asset prices, and as a hedge tool, it is highly favored in the market.
Furthermore, many central banks around the world are still actively purchasing gold. In addition, amid the escalation of the situation in the Middle East leading to short-term oil price increases, gold will also benefit.
Therefore, market participants are willing to buy gold at very high prices, while holders are unwilling to sell gold.
Strong demand for silver.
Citigroup believes that the outlook for silver is the strongest in decades. Therefore, Citigroup will maintain the target price of silver within 0-3 months at $35 per ounce, and raise the target price from $38 per ounce to $40 per ounce within 6-12 months.
Citigroup stated that historically, when sentiment weakens in developed markets, silver usually experiences its strongest bull markets, such as in 2009-2012, 2016-2017, 2020, etc. In this situation, it often implies a weaker dollar, increased investor allocation to precious metals, and enhanced industrial demand for silver.
Currently, industries related to the energy transition, such as the solar energy and electric vehicles sectors, have strong demand for silver. In addition, the Fed rate cut has also encouraged investors to invest in silver through tools like etfs.
Citigroup pointed out that there is a huge deficit in silver consumption at present, which can only be met by silver inventory holders selling silver. According to Citigroup's model, holders of silver bars and coins need to sell about 1% of the total inventory per month to meet the excess demand for silver in the market.
Long-term soft demand for oil, along with supply growth from non-OPEC+ countries.
Citigroup stated that recent oil price fluctuations reflect the game between the weak fundamentals of oil and intensified geopolitical risks. Considering the market's fear of future supply shortages, Citigroup has raised its price expectations for Brent oil in the fourth quarter of 2024 and the first quarter of 2025 to $120 per barrel.
However, Citigroup is bearish on long-term oil prices, expecting an average oil price of $60 per barrel in 2025.
Citigroup expects a moderate to large-scale surplus in the oil market in 2025, partly due to weak oil demand in some global markets, as well as the increasing popularity of electric cars and new energy vehicles (NEVs), further reducing oil demand.
In addition, the growth of oil supply from non-OPEC+ countries may be very strong and widespread, especially in the Americas region.
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