Gold and oil prices could soar Prices to within next 12-18 months

Financial analysts at Citi have recently projected a significant surge in the prices of gold and oil within the next 12 to 18 months. Aakash Doshi, Citi's North America head of commodities research, stated that gold prices could potentially soar to an impressive $3,000 per ounce, representing a potential 50% increase from its current price of $2,016. According to Doshi, this surge is contingent on the occurrence of one of three possible catalysts.

Rapid increase in Central Bank Purchases

One of the potential catalysts for this surge in gold prices is a substantial increase in purchases by central banks. If central banks sharply ramp up their acquisitions of the yellow metal, it could lead to a significant surge in its price. This trend could be accelerated by the ongoing de-dollarization across emerging markets, which may result in a crisis of confidence in the U.S. dollar. Such a scenario could potentially double central bank gold purchases and challenge jewelry consumption as the primary driver of gold demand.

Geopolitical and economic triggers

Another scenario highlighted by Citi is the possibility of a deep global recession or stagflation. While the likelihood of these scenarios is perceived to be low, they present potential triggers for a surge in gold prices. Additionally, the inverse relationship between gold prices and interest rates could play a significant role in driving up the price of gold. As interest rates decline, gold becomes more appealing compared to fixed-income assets, leading to increased demand.

Despite these potential catalysts, Citi's base case for bullion is set at $2,150 in the second half of 2024, with the average price of gold expected to be slightly over $2,000 in the first half of the year. However, Doshi added that a new record price could potentially be reached towards the end of 2024, indicating uncertainty and volatility in the market.

Potential surge in oil prices

In addition to the projections for gold, Citi's analysts have also highlighted the potential for oil prices to reach $100 per barrel. Aakash Doshi outlined that higher geopolitical risks, deeper OPEC+ cuts, and supply disruptions from key oil-producing regions could serve as catalysts for this surge. Geopolitical tensions in regions such as the Middle East and the impact of ongoing conflicts on oil production and exports are factors that could contribute to this price surge.

Despite these projections, it is important to note that these potential scenarios are subject to a range of geopolitical, economic, and market factors. While these forecasts offer insights into potential future price movements, the actual trajectory of gold and oil prices will depend on a complex interplay of global events and economic conditions.