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Gold's recent push near all-time highs was just a test run as Citigroup's Morse sees prices hitting $2,400

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(Kitco News) - The gold market faces a choppy road ahead, but investors should keep the faith as the path remains significantly higher, according to Citigroup's chief commodity analyst.

In a recent interview with CNBC's Indian affiliate channel Edward Morse, global head of commodities strategy at Citi Research, said that he sees gold prices eventually going to $2,400 an ounce; however, he added that the near-term price action remains volatile because of shifting interest rate expectations based on uncertain economic conditions.

Last week the Federal Reserve raised interest rates by 25 basis points and shifted to a more neutral policy stance. Morse said that while it's likely the central bank is done raising interest rates, investors will have to wait for more data to get a clearer picture.

A critical report economists are watching will be Wednesday's Consumer Price Index. According to consensus forecasts, economists are looking for inflation over the last 12 months to rise 5%. Any reading below 5% could solidify expectations that the central bank is finished raising interest rates.

Ahead of Wednesday's inflation data, markets currently expect interest rates to be roughly 100 basis points lower by year-end, with a potential rate cut coming as soon as September.  

Looking at gold's price action, Morse said that the recent push above $2,080 an ounce shows just how much potential there is in the marketplace. However, he added that gold's uptrend depends on a weaker U.S. dollar and lower interest rates.

"The gold prices are really an anticipation of what's going to happen to interest rates and what's going to happen to the U.S. dollar. Clearly, there is a lot of money to be made, but on the other hand, we've got to remember that [prices] are based on what the value of the dollar is portrayed to be," he said in the interview.

"We certainly think it will go to $2,400 an ounce. Our probability on that is fairly high. We remain bullish on gold. But we have to remind investors that this is a choppy road, and they need patience," he added.

Currently, gold prices are holding solid gains above $2,000; however, the market is struggling to attract new momentum after prices failed to break out to new all-time highs last week. June gold futures last traded at $2,034.50 an ounce, roughly unchanged on the day.

Along with gold, Morse said that he is also bullish on silver as the price continues to hold solid support above $25 an ounce.

Buy the dip; gold prices are going to be a lot higher five years from now - Degussa's Polleit

However, he added that he sees more potential in gold than silver.

"We think silver has another 10 to 15% upside to it," he said. " It is not the first choice for investors against gold. But we do definitely think that there's room for upside. With that upside, however, we have much more upside in gold. So we think the ratio between gold and silver is likely to widen over time," he said.

Morse's expectation for silver would see prices push above $29.50 an ounce this year. July silver futures last traded at $25.805 an ounce, roughly unchanged on the day.

Morse said that he is more neutral on the Platinum Group Metals for platinum and palladium. However, he added that short-term supply issues could create upside volatility in the near term.

Outside of the precious metals, Morse said that he is significantly bullish on copper in the long term.

"In the longer term, we are extremely bullish copper. We don't know where copper prices could go, but our estimate for 2025 is in the $12,000 per tonne range," he said.

Citi's long-term copper target is significantly higher compared to current prices. Copper on the London Metals Exchange is currently trading around $8,591 per tonne, up 0.11% on the day.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.