Jan 30 (Reuters) - Gold investment allocations are being underpinned by a broad mix of overlapping geopolitical and economic risks, but around half of the risk may fade later this year, Citi said on Friday.
Some of the core risks supporting gold demand - including U.S.-China tensions, China–Taiwan risks, concerns over U.S. government debt and uncertainty around artificial intelligence - were likely to keep prices elevated by historical standards, Citi said.
However, the bank estimates that roughly half of the risks currently embedded in gold prices will either not materialize in 2026 or fail to persist beyond the year.
"We see the Trump administration pushing for U.S. goldilocks during the 2026 midterm year, and we see an end to the Russia-Ukraine war, and eventual Iran de-escalation, as representing major declines in risk relative to today," the bank added.
Earlier this week, spot gold advanced to a record high close to $5,600/oz on the back of geopolitical and economic uncertainty.
On Friday, however, prices fell 12.6% as of 1840 GMT, headed for its biggest daily percentage fall ever, as the dollar firmed after U.S. President Donald Trump named former Federal Reserve Governor Kevin Warsh as his choice to lead the U.S. central bank when Jerome Powell’s term ends in May.
"The nomination of Warsh, if confirmed, will further cement our longstanding base case that the Fed retains its political independence, another medium-term bearish factor for gold prices," Citi added.
Reporting by Anushree Mukherjee in Bengaluru; Editing by Alex Richardson
