Citi analysts predict that a shift in gold ETF flows will be a key factor in driving gold prices up until 2025. After a period of de-stocking, the analysts anticipate a significant turnaround in the physically backed gold ETF market, which has historically influenced gold bull markets.
The multi-year cycle of gold ETF outflows, which saw around 930 tonnes of bullion sold from November 2020 to May 2024, is expected to come to an end. Citi forecasts a reversal, with gold ETFs projected to contribute a net demand of 275 tonnes by 2025, compared to the net selling of 250 tonnes in 2023. This shift represents a major change in the gold market’s dynamics.
Citi emphasizes the importance of gold ETF inflows in driving prices higher, especially as other factors like Chinese gold consumption decrease and official sector purchases potentially slow down in the latter half of 2024.
The analysts believe that renewed interest in gold ETFs could push prices to $3,000 per ounce by mid-2025, supported by factors such as potential Fed rate cuts, increased U.S. recession risks, and heightened market volatility.
Historically, strong gold ETF inflows have been a characteristic of past gold bull markets, such as the rally post-Financial Crisis and the price surge in 2019-2020.
Citi projects that the ETF demand share of gold mine supply will rise from 1% in 2024 to 7-7.5% by 2025. This increase, while modest compared to other demand components like jewelry or official sector purchases, signifies a significant change in the market, with gold ETFs expected to absorb physical stocks rather than supply them.
Citi’s analysis underscores the importance of ETF flows in the expected increase in gold prices, indicating that the upcoming period could witness a substantial bull market driven by this renewed investment interest.
Analysis:
Citi analysts are predicting that the shift in gold ETF flows will play a crucial role in driving gold prices higher until 2025. After a period of selling off gold bullion, there is expected to be a reversal with gold ETFs contributing to a net demand by 2025. This renewed interest in gold ETFs could potentially push prices up to $3,000 per ounce by mid-2025. Historically, strong gold ETF inflows have been associated with past gold bull markets, and Citi’s analysis highlights the significance of ETF flows in the anticipated rise in gold prices. Overall, this suggests that the gold market could experience a substantial bull market in the coming years due to increased investment interest in gold ETFs.