Gold has jumped about 27% in 2025, amid heightened geopolitical tensions. Factors such as former President Donald Trump’s trade policies, escalating conflict in the Middle East, and persistent U.S. deficit concerns have boosted safe-haven buying. Plus, central banks have played a key role, increasing their gold reserves as part of diversification strategies.
Can the Rally Last?
Citigroup Inc. expects gold prices to retreat below $3,000 an ounce in the coming quarters, signaling a potential end to one of the most notable commodity rallies in recent years. In a recent report, analysts including Max Layton projected bullion to fall to a range of $2,500 to $2,700 by the second half of 2026, as quoted on Bloomberg.
Drivers of the Likely Decline: Fed Cuts and Rebounding Growth
According to Citi, the anticipated slide in gold prices may stem from weaker investment demand, a rebound in global economic growth, and interest rate cuts by the Federal Reserve. As global economic confidence improves and the Fed shifts from a restrictive to a neutral policy stance, demand for safe-haven assets like gold may wane.
Outlook Hinges on Global Conditions and Policy Shifts
Citi sees declining investment interest starting in late 2025, and the impact of a stimulative U.S. fiscal budget. As Trump's policy posture potentially softens, and global risks stabilize, the bullish narrative for gold may fade.
Scenario Analysis: Base, Bull, and Bear Cases
In its base case — given a 60% probability — Citi expects gold to hold above $3,000 in the short term, before trending lower (read: Why Gold ETFs Offer the Best Safe Haven Right Now).
The bull case (20% probability) sees a potential new high in Q3 2025 if fears around tariffs, geopolitical instability, and stagflation intensify. Meanwhile, the bear case (20%) envisions a sharper selloff, driven partly by a swift resolution of tariff disputes.
Current Prices and Market Reactions
As of the latest trading session, spot gold was trading at around $3,381 an ounce, experiencing volatility. This followed Trump’s call for a Tehran evacuation amid the Israel-Iran conflict, and his abrupt departure from a G7 summit.
ETFs in Focus
Against the above-mentioned backdrop, gold-backed exchange-traded funds (ETFs) like SPDR Gold MiniShares Trust GLDM, iShares Gold Trust IAU, iShares Gold Trust Micro IAUM, GraniteShares Gold Trust BAR and Goldman Sachs Physical Gold ETF AAAU should be monitored closely.
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iShares Gold Trust (IAU): ETF Research Reports SPDR Gold MiniShares Trust (GLDM): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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