Citi has raised its gold price forecast to $3,500 for the next three months. This is an increase from the previous estimate of $3,300, with a new trading range set between $3,300 and $3,600, up from $3,100 to $3,500. Citi’s adjustment comes as they see a weaker US economy and growing inflation concerns in the second half of 2025. Coupled with a declining dollar, these factors could drive gold prices to new record highs.

Concerns Over US Economic Data

There are concerns about US labor market data from the second quarter as well as doubts about institutions like the Federal Reserve and the Bureau of Labor Statistics. Despite these issues, investment demand for gold remains strong, and moderate buying from central banks is expected to keep gold in a good position in the market. We maintain a bullish outlook on gold for the next three months, aiming for a price target of $3,500 and a possible trading range up to $3,600. Traders in derivatives might consider strategies that benefit from rising gold prices, such as buying call options or creating bull call spreads that expire in October or November 2025. This outlook is encouraged by the worsening US economic conditions. The recent Q2 GDP report revealed a growth rate of just 0.8%, which fell short of expectations. Additionally, the June Non-Farm Payrolls report showed much lower job creation compared to what we saw in 2024. This slowdown highlights the challenges facing the US economy.

Impact of Economic Pressures and Trade Tariffs

At the same time, new trade tariffs are raising inflation concerns, with the July Consumer Price Index climbing to 3.9%. These pressures are contributing to a weaker dollar, as shown by the Dollar Index (DXY) dropping from around 105 in May to its current level of 101.5. A weaker dollar typically makes gold more appealing to foreign buyers. Strong demand for gold acts as a solid foundation for any bullish strategy. Q2 2025 reports indicate that central banks, especially in Asia, continued to increase their gold reserves, adding over 200 tonnes. This ongoing buying helps cushion any price drops. Lastly, there are worries about the Federal Reserve’s credibility after its dovish stance in July. Some traders believe this shift was due to political influence rather than just economic conditions. This kind of uncertainty usually boosts demand for gold as a safe-haven asset. Create your live VT Markets account and start trading now.

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