Gold rally is coming to an end, says Citi. Why may the price fall below $3000?

The historic rise in the price of gold will soon come to an end - the metal could fall below $3,000 per troy ounce in the coming quarters, Citigroup has warned. The bank believes that one of the most notable rallies in the exchange-traded commodities market is losing support.

In Citi's baseline scenario (60% probability), the price of gold will still hold above $3,000 an ounce in the coming quarter, but then go down, reports Bloomberg. «Our analysis suggests gold will return to around $2500-2700 an ounce by the second half of 2026,» quotes the agency in a note from Citi analysts led by Max Layton. The middle of that range is about a quarter below the current price. 

Since the beginning of the year, gold has added 30% to its price, hitting a record high in April. The drivers have been geopolitics - Donald Trump's trade maneuvers and escalation in the Middle East - as well as concerns about the U.S. budget deficit and sustained interest in gold from central banks looking to diversify reserves. But Citi believes this trend will start to reverse. 

«We expect investment demand for gold to decline in late 2025 and into 2026 as supportive factors in the form of President Trump's popularity and 'growth insurance' (interventions that can support the economy - Oninvest) in the US eventually come into play, especially as the midterm elections approach,» the research note said. In addition, «we see significant room for the Fed to ease policy - from the current tight level to neutral,» Citi analysts added.

At the same time, Citi expressed strong optimism about aluminum and copper. Aluminum is «largely dependent on a recovery in global growth and improved market sentiment,» the bank's analysts said.

Gold in the morning of June 17 gold rose by 0.2% to $3391 per ounce after a correction the day before. According to data Bloomberg, the spot price of the precious metal briefly rose above $3400 at the beginning of trading. The occasion was the escalating conflict between Israel and Iran and Donald Trump's call for evacuation from Tehran. That again prompted investors to buy defensive assets, reports Reuters. Meanwhile, August gold futures were down 0.2%.

The market is oscillating between expectations of both escalation and de-escalation in the Middle East, and it is this swing that is pushing the price of gold up and down around $3400, noted KCM Trade chief market analyst Tim Waterer.

The hostilities between Israel and Iran are now in their fifth day. On June 16, Israel struck Iran's state broadcaster, and IAEA chief Rafael Grossi reported severe damage to Iran's largest uranium enrichment facility. Against this backdrop, Trump canceled his attendance at the G7 summit in Canada and rushed back to the US. He called on everyone to evacuate Tehran, citing the authorities' refusal to sign an agreement limiting the country's nuclear program.