Gold Price Crash: Further Fall Likely, Says Citi — Check Projection

The significant crash in international gold prices on Monday has prompted analysts at Citigroup to slash their downside target from $4,000 to $3,800 per ounce. The material support for bullion will likely be around the 100-day average of $3,600, analysts said in a note.

Gold dropped below $4,000, extending losses from the worst rout in over a decade as progress on a US-China trade deal sapped haven demand.

Citi said US President Donald Trump's shift towards dealmaking not just with China, but also with Malaysia, Thailand, Vietnam, Cambodia, Brazil, India, and Taiwan and President Xi Jinping's apparent willingness to go along with it will move gold further down over the coming days and weeks.

Alongside a shift in price momentum in the gold market, a possible end to the US government shutdown will also contribute to the bearish outlook for the yellow metal.

"We downgrade our gold three-month target to $3,800 per ounce (from $4,000), around the 50-day moving average, and our silver 3-month target to $42 per ounce (from $55)," the note said.

Investors have sought relief from global trade tensions this year in gold, a traditional safe haven asset in times of volatility, even as central banks ramped up their bullion holdings to diversify away from the US dollar. That has led to the price rising from $2,700 at the start of the year to as high as $4,380 last week.

A market strategist at the World Gold Council said demand from central banks has tapered recently and a deeper correction in gold prices might be welcomed by professional dealers, according to a Bloomberg News report.

Citi analysts also noted that investors have secured huge profits in gold, minting about $17 trillion mostly bought at around the long-term average of $1,500, compared to the recent level of $4,250.

If investors sold just 2% of those profits, it would equal twice the annual global gold mine supply, which could push prices down near the end of the year.

If households moved just 0.1% of their wealth into gold, it would also double gold demand. Inversely, if investors shift even slightly out of gold because of lower fears about tariffs or better US growth, the amount sold would far exceed the physical gold market’s capacity, Citi said.

"The litany of worries that are driving gold higher may eventually need to become the base case to sustain this bull run through 2026," Citi analysts said.