Is Gold very likely to rise to $3,000?

Two months ago, $Citigroup(C)$ saw $3,000 an ounce in gold $Gold - main 2406(GCmain)$ by 2025 as an extremely optimistic anomaly, but Aakash Doshi, North America head of commodity research at Citi, said Tuesday that $3,000 is now a highly probable event.

Doshi's comments come at a time when gold prices are in a consolidation phase near $2,400 after touching highs. Last week, gold hit an all-time intraday high of $2,448 before falling back sharply. However, commodities investor Dennis Gartman said that gold has entered a multi-year bull market cycle, looking to reach $3,000 in the next two years.

One important reason to be so bullish on gold is that it is not just the rising price of the US dollar. Gold prices in various currencies have hit record highs, such as the Swiss franc, the euro, the British pound, the Japanese yen, the Canadian dollar and the Chinese yuan.

Not only that, but interest rates and bond yields no longer dictate the price of gold. Gartman expects the Fed to cut rates only once or twice this year, and only after the U.S. presidential election in November. Therefore, we can only explain from the safe-haven demand for gold.

As geopolitical tensions continue to escalate, so does the likelihood that the U.S. government will once again weaponize the dollar, even considering outright confiscation of Russian assets. Other countries see this threat, so the de-dollarization trend will not reverse any time soon.

For now, the only alternative to the dollar is gold. Based on the above judgment, global central banks will continue to buy gold, and this is just the beginning.

Of all the countries buying gold on a large scale, China's behavior is the most noteworthy. If China wants to compete with the dollar as an international currency, it needs at least 20% of its reserves in gold. But even after 17 months of buying gold, the central bank's share is just over 4%.

Doshi said that the large-scale central bank gold purchases in the past two years have had an impact on the market in two ways:

1. It has raised the floor of the gold price;

2. It has suppressed the downside volatility of the price.

The real floor of support for gold prices may now be between $1,900 and $2,000.