Gold price forecast as Citi predicts a 26% crash

Gold price has been in a strong rally this year, helped by soaring safe-haven demand amid rising risks. It jumped to a high of $3,492, up by 30% this year, and by 46% in the last 12 months. This article explores whether gold has more upside as Citi analysts warn of a potential plunge below $3,000.

Citi analysts warn gold price could plunge below $3,000

Analysts at Citigroup are warning that gold price could crash below $3,000 and move to between $2,500 and $2,700 in the next few months. Such a crash would be between a 20% and 26% plunge from the current level. 

The analyst noted that gold price will plunge because of profit-taking and weak demand from investors. He said:

Citi becomes the first major bank to slash the gold price forecast. Goldman Sachs analysts have predicted that gold will jump to $3,700 by the end of the year. The analysts cited strong ETF inflows and recession risks.

Morgan Stanley has a gold forecast of $3,400, while JP Morgan sees it being between $3,675 and $4000 this year.

Citi’s gold forecast nearly aligns with that of Wells Fargo, whose analysts anticipate that the metal will drop to about $2,800 by the end of the year.

Gold and Bitcoin demand ETF demand diverging

A potential reason why gold price is wavering is the potential divergence between gold and Bitcoin. 

Data shows that the SPDR Gold Shares (GLD) ETF has had $6.7 billion in inflows this year. It added $711 million in inflows last week, higher than the previous week’s $426 million.

Bitcoin ETFs, on the other hand, have been firing on all cylinders this year. Data shows that the iShares Bitcoin ETF (IBIT) has had net inflows of over $12.2 billion this year. It now has over $73 billion in assets

All spot Bitcoin ETFs have had inflows of over $46 billion since January last year, making them the fastest-growing assets ever. 

Some investors see Bitcoin as a better option than gold because of its supply cap and the fact that over 95% of all coins have been mined. Bitcoin supply on exchanges has also continued plunging in the past few months.

Federal Reserve interest rate decision

The next key catalyst for gold price will be the upcoming Federal Reserve interest rate decision on Wednesday. 

Economists expect the bank to leave interest rates to leave interest rates unchanged between 4.25% and 4.50%.

The bank will also signal that it will maintain status quo as it observes the impact of Donald Trump’s tariffs on inflation. Data released last week showed that the headline consumer price index (CPI) rose by a smaller margin than expected.

The most likely situation is where the bank slashes interest rates by 0.25% starting from its September meeting.

Gold price forecast

The daily chart shows that gold has been in a strong bullish trend in the past few years. Recently, however has remained in a tight range as it lost its momentum. 

Gold has remained above the 50-day Exponential Moving Averages (EMA), a sign that bulls are in control. It has also formed an ascending triangle pattern, which is made up of a horizontal line and an ascending trendline. Therefore, the gold price will likely have a bullish breakout, potentially to the psychological point at $3,500. Learn more about such setups in this guide on how to trade gold.