Against the backdrop of tightening global liquidity and collective declines in Bitcoin and commodities, the previously soaring gold market is facing a severe value reassessment.
According to Zhui Feng Trading Desk, Citigroup Research pointed out in its latest commodity report on January 30 that current gold prices have already significantly priced in future uncertainties.
Maximilian Layton, the bank's Global Head of Commodities, believes that although gold prices may still have room to rise in the short term, their valuation has reached "extreme levels." As safe-haven sentiment collectively subsides in the second half of 2026, the "pillars" supporting gold prices may face structural collapse.
Multiple historical indicators are flashing "red lights" for valuation. Citigroup's report demonstrates the bubble-like characteristics of the current gold price through multi-dimensional modeling.
First is the decoupling from the real economy: Global annual expenditure on gold as a percentage of GDP has surged to 0.7%, the highest level in the past 55 years, far exceeding the period during the 1980 oil crisis.
Simultaneously, the current gold price has completely detached from the marginal production costs of the mining industry. The research report shows that the profit margins of high-cost gold miners are at their highest level in 50 years.
Even against the backdrop of extreme inflation expectations, the ratio of gold to global broad money supply has risen to 16%, even higher than the peak during the first oil crisis in the early 1970s.
Citigroup emphasizes that once the shift in wealth allocation is complete, gold will revert to equilibrium pricing based on savings allocation.
"If the allocation ratio of gold merely returns to the historical norm of GDP share (0.35%-0.4%), with all other factors remaining unchanged, the gold price would be nearly halved from current levels, falling back to $2,500-$3,000 per ounce."
Although Citigroup's baseline price target for 2026 is $4,600, its downside risks are increasing sharply as the valuation becomes more bubble-like. Outlook for Second Half of 2026: Fading Safe-Haven Sentiment is the Biggest Threat Despite maintaining a supportive view on gold prices in the short term (0-3 months) with a target price of $5,400-$5,600 per ounce, citing persistently high geopolitical and economic risks, Citigroup's stance turns noticeably "cautious" for the second half of 2026.
Citigroup expects that a series of risk factors supporting the current high gold prices will subside later this year. Specifically:
Geopolitical De-escalation: In its baseline scenario, Citigroup anticipates that some form of agreement regarding the Russia-Ukraine conflict may be reached before the summer of 2026, while the situation with Iran is expected to de-escalate. The alleviation of these two major risks would significantly weaken investors' hedging motives.
US Economic "Goldilocks": The Trump administration is expected to steer the US economy into a "Goldilocks" state (high growth, low inflation) during the 2026 midterm election year, which would reduce the demand for gold as a portfolio hedge.
Fed Independence: Despite political pressure, Citigroup expects the Federal Reserve to maintain its independence, which is also a medium-term headwind for gold prices. The confirmation of Wash as the next Fed Chair would reinforce market confidence in the independence of monetary policy.
Based on this, Citigroup predicts that gold prices will begin to decline in the second half of 2026 and fall further in 2027. Under its baseline scenario, the gold price will retreat to $4,000 per ounce in 2027; while under a bear market scenario (20% probability), the price could plunge to $3,000 per ounce.
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