Gold could soar 25% in the next 18 months as Middle East tensions and Fed easing boost the precious metal, Citi says

• Gold could hit $3,000 per ounce in the next six to 18 months, a 25% jump from its current price, says Citi.
• Iran's weekend strike on Israel has driven up demand as investors flock to safe assets.
• Citi sees increased prospects for a pullback in May or June, but expects "strong buying support" at $2,200.

The price of gold is slated to rocket 25% as the bullion's appeal rises amid growing tensions in the Middle East and looser monetary policy on the horizon, according to Citi.

The price of the yellow metal dipped slightly on Tuesday after jumping above $2,400 per ounce last week, and Citi strategists led by Aakash Doshi said the momentum is still rolling.

In a Monday note to clients, Doshi said the bank saw gold smashing through $3,000 per ounce within the next six to 18 months, a 25% leap from current levels.

The team also upgraded its 2024 price target for gold to $2,350 and adjusted the 2025 forecast to $2,875. They also expect trading to regularly "test and breach" $2,500 per ounce in the latter part of 2024.

"The recent gold rally has been aided by geopolitical heat and is coinciding with record equity index levels; so a steeper risk-off environment should further boost prices," Doshi wrote in the note.

Iran's strike against Israel over the weekend has raised fears of worsening conflict in the region, and commodities like oil are on edge while gold demand surges as investors flock to safe-haven assets.

Gold has also surged upward lately despite a rise in real and nominal yields, a more hawkish monetary policy, and a rallying US dollar, Citi notes.

"Even as the implied 'duration' of gold has shortened since June 2021, an eventual Fed cutting cycle and Treasury rally could be the bullish kicker to $3,000/oz," the note said.

Gold usually moves opposite to interest rates. The Fed has indicated it will cut rates this year, which would further drive up the metal's price, but March's hotter-than-expected inflation has likely pushed the timing of cuts back to later in the year.

Post-pandemic buying led by China and developed markets have also contributed to massive inflows into gold-backed exchange-traded funds. This will "buffer the path to $3,000," the analysts wrote.

Citi sees increased prospects for a pullback in prices around May or June, but expects "strong buying support" at the $2,200 threshold.