Citi has released a research report stating that the outlook for gold prices will depend on developments in the Middle East.
Under the base case scenario, which carries an indicative probability of 60%, if the Strait of Hormuz reopens before the end of 2026 and the conflict between Yemen and Saudi Arabia de-escalates, the bank expects gold prices to have significant upside potential, with a 0-3 month target of $4,500 per ounce and a 6-12 month target of $5,000 per ounce.
Citi noted that a notable decline in oil prices could prompt the Federal Reserve to pivot toward rate cuts, driving investment demand for gold and reigniting a momentum bull market in the metal. Additionally, falling oil prices could support gold buying in emerging markets by boosting purchasing power.
Under the bull case scenario, which carries an indicative probability of 10%, Citi assumes a rapid agreement between the United States and Iran, a significant drop in oil prices, and a swift dovish pivot by the Federal Reserve, leading to a sharp weakening of the dollar and a recovery in cross-asset risk appetite, which could push gold prices even higher.
Under the bear case scenario, which carries an indicative probability of 30%, the bank expects the Strait of Hormuz to remain blocked, in which case further downside for gold prices would be limited, with a potential low of $3,500 per ounce.
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