(Kitco News) - Although the gold market is holding critical support above $2,000 an ounce, it lacks any significant bullish momentum; however, one U.S. bank still sees substantial potential for the precious metal.
In a recent interview with CNBC, Aakash Doshi, Citi’s North America head of commodities research, said that there is a chance gold prices could hit $3,000 an ounce within the next 12 to 18 months.
However, this is Citi’s bull-case scenario and its base case is slightly more muted. The Bank Citi sees the precious metal averaging $2,150 in the second half of 2024. Doshi said that gold could reach a new record towards the end of 2024.
While many analysts expect gold prices to hit record highs this year, the institution with the most bullish outlook remains Bank of America, as its commodity analysts see the potential for gold to hit $2,400 an ounce this year.
Doshi said the biggest wildcard in his bullish outlook is the ravenous demand from central banks. He explained that an acceleration of the de-globalization trend that is prompting nations to diversify away from the U.S. could lead to a crisis of confidence for the greenback and prompt central banks to intensify their gold purchases.
Doshi pointed out that if central banks doubled their gold purchase, they would rival the jewelry market as the most significant source of demand in the marketplace. The global jewelry market accounts for about 50% of global gold demand.
Last month, the World Gold Council said that central banks bought over 1,000 tonnes of gold in 2023; the sector was only 45 tonnes away from breaking record purchases made in 2022. Last year, the People’s Bank of China led the gold market with its purchases. Analysts note that China’s gold holdings only represent about 4% of its total reserves, which means there is plenty of room to grow.
“If that goes again [to] double very quickly to 2,000 tons, we think that would be actually very bullish for gold,” Doshi told CNBC in the interview.
The second factor that could drive gold prices nearly 50% higher than current prices would be a deep global recession, forcing the Federal Reserve to aggressively ease interest rates.
“That means the brakes have been cut, not to 3%, but to 1% or lower - that will take us to $3,000,” Doshi said. However, Doshi added that a deep recession is an unlikely scenario.
Gold has struggled through the new year as investors have pushed the Federal Reserve’s inevitable rate cuts later in the year. According to the CME FedWatch Tool, June is the most likely month the Fed will start its new easing cycle.
