Citi has adjusted its gold price target for the next 0–3 months to $3,500 per ounce. They predict gold will trade between $3,300 and $3,600 soon. This update comes after a declining outlook for the US economy and surprising tariff effects. Rising US tariffs are causing inflation pressures that are stronger than expected. Additionally, labor market data is getting worse. There are rising concerns about the Federal Reserve’s independence and the reliability of US economic data.

Gold As A Hedge

Citi is now more optimistic about gold than before, adjusting its forecast from a range of $3,150 to $3,500. They believe gold will break out because of recent economic changes. Gold is viewed as a safeguard against inflation, political instability, and global uncertainty. Citi expects gold prices to remain strong, predicting they will reach new record highs as the US economy worsens. The appeal of gold as a safe investment is likely to increase. With the US economy in decline, gold is expected to move out of its current trading range. The new target of $3,500 an ounce indicates previous strategies of trading within a range are outdated. We need to focus on capturing upward momentum over the next three months. Recent economic data backs this positive outlook. Last week, initial jobless claims rose to 265,000, a nine-month high, signaling a weakening labor market. This, along with inflation pressures from new 15% tariffs on European goods, creates an ideal situation for gold as a safe haven.

Derivative Trading Strategy

For those trading derivatives, it’s time to establish long positions through call options. We are considering options that expire in September and October, with strike prices around $3,400 and $3,500, to take advantage of the expected price increase. The immediate goal is to bet on gold rising before the fourth quarter. To manage costs and risks, we recommend using bull call spreads. For example, buying a $3,350 call while simultaneously selling a $3,500 call for October delivery offers a strong risk-reward setup. This strategy allows us to define our profit zone while lowering the upfront cost. Gold market volatility is rising, with the GVZ index close to 19. Although this is higher than before, it is still below the peaks seen during the 2024 election cycle. This suggests that purchasing options remains affordable, though this opportunity may not last long. Concerns about the Federal Reserve’s independence and the credibility of economic data are gaining traction. This growing distrust creates a strong incentive for investing in gold, which wasn’t as prominent during the inflation scares of the early 2020s. Because of this, we are also protecting our current long futures positions. We are buying out-of-the-money puts with a strike price around $3,300 as a form of portfolio insurance. This will shield us from unexpected downturns if the breakout fails. Create your live VT Markets account and start trading now.

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