Eric Sepanek
SBC Founder
Eric Sepanek is the founder of Scottsdale Bullion & Coin, established in 2011. With extensive experience in the precious metals industry, he is dedicated to educating Americans on the wealth preservation power of gold and silver.
Citi is encouraging investors to “buy the dip” as gold prices experienced a slight pullback. The third largest bank in the US expects the yellow metal to experience short-term weakness due to economic policy concerns and waning global purchases. However, Citi analysts maintain a $3,000 price target over the next six months — a common price prediction on Wall Street. The banking giant’s bullish outlook is informed by long-term indicators such as steady central bank demand, worldwide de-dollarization efforts, and the dollar’s deteriorating position.
What’s going on with gold prices?
Gold prices have declined over the past few days amid widespread volatility in the commodities market sparked by post-election jitters. Following President-elect Donald Trump’s victory and the accompanying “red wave” in both houses of Congress, the yellow metal shed over 8%. This retreat comes after prices hit an all-time high of $2,786.44, adding to concerns about a potential price reversal.
Buying the Dip
In a note to investors, Citi calmed growing fears surrounding gold’s decline by reaffirming their positive outlook. The bank even went a step further to recommend investors take advantage of the relatively low prices to scoop up more gold with the expectation of higher incoming prices. Through the buy-the-dip strategy, investors capitalize on short-term price falls to lower an investment’s cost basis, resulting in higher potential returns. This investment method is most effective when an asset is on an upward trajectory. According to Citi, gold fits this description perfectly with a short-term dip and long-term momentum. Anything below $2,700 is a bargain entry point, according to the bank.
👉 Related Read: What is Dollar Cost Averaging?
Steady Bullish Drivers
Citi analysts reference many foundational factors behind their anticipation of higher gold prices:
Economic Weakness
Domestic economic weakness is expected to continue fueling gold prices as safe-haven demand rises. The US national debt and annual $1 trillion interest payments weigh heavy on the dollar’s strength, further strained by the Federal Reserve’s aggressive rate hike policy. Despite claims of a soft landing, inflation is spiking again and the labor market is weakening.
De-dollarization Trends
Trust in the dollar is fast-eroding as countries seek to distance their economies from the debt-laden USD. This global de-dollarization trend is mirrored by a modern-day gold rush as emerging markets and retail investors eagerly diversify with the yellow metal, effectively replacing the dollar as a financial foundation.
Central Bank Demand
As the largest consumers of gold, central bank demand is a key indicator of the yellow metal’s performance. Despite a slowdown in purchases, especially from China, governments have been topping up their reserves at record rates for years.
Gold Targets Remain High
Gold’s pullback has raised alarm among newcomers to the market but hasn’t swayed the forecasts of financial institutions and precious metals advisors. In fact, experts have raised their gold price predictions more than once in 2024 following dozens of record highs. In its report to investors, Citi reaffirmed its call for a $3,000 gold in 2025, representing a 17% surge from current levels. Bank of America and even the World Gold Council agree with this projection.
A Pit Stop on the Rally
Gold’s current slump has prompted buying recommendations from several prominent banks and advisors. Earlier this week, UBS also called for investors to take a buy-the-dip approach, highlighting $2,600 and below as the ideal entry point. For its part, JP Morgan described gold’s softening as a “stumble, not a sea change”, underscoring their expectation of a reversal back to the upside.
“This is a great opportunity to get into the [gold] market again.”– Joe Elkjer, Precious Metals Advisor at Scottsdale Bullion & Coin