This week, Citi Research raised its forecast for world gold prices in the next 3 months to 3,500 USD/ounce, up from the previous forecast of 3,200 USD.
Gold price forecasts are being raised as Chinese insurance companies are stepping up gold purchases as the market is uncertain and concerns about tariff risks increase safe-haven demand.
"We believe that the physical gold market is currently in serious shortage. This is very rare. This means prices must increase to encourage gold sellers to sell, helping to balance supply and demand," Citi experts said.
The bank expects industrial demand for gold to surpass 110% of mining output in the second quarter of 2025, the highest level since the global financial crisis.
Central banks in emerging markets, including China, are actively buying gold. Meanwhile, global investors are also increasing their gold purchases through ETFs and over-the-counter (OTC) markets, due to concerns about growth in the US and the world, according to Citi.
Citi estimates that China's decision to allow 10 insurance companies to allocate up to 1% of total assets to gold could create demand of about 255 tonnes per year, equivalent to about a quarter of the total amount of gold purchased by global central banks.
"The fact that insurance companies may continue to expand their gold holdings in their portfolios shows that gold demand in China still has room for growth," Citi noted.
In addition, China has granted a new gold import quota and reopened a business mechanism for gold import price differences following recent tax increases from the US. This is expected to boost gold imports in the next few months.
Citi also raised its average second-quarter gold price forecast to $3,250 an ounce, compared to the previous forecast of $3,100, due to scarce supply and high demand.
The difference between current trading gold prices and production costs (about $2,000/ounce) is creating a good opportunity for gold mining companies to ensure future profits, especially in the context of a weak USD and possible interest rates, Citi said.
