Gold prices could soar to $3,000 per ounce due to the significant potential expansion of financial flows, according to a recent report from Citi analysts.
The bank believes that the weakening U.S. labor market, coupled with a general trend of deflation and a notable June Consumer Price Index (CPI) level, bolsters the case for a dovish policy shift by the Federal Reserve (Fed) at the upcoming FOMC meeting in July.
Federal Reserve Chairman Jerome Powell stated on Monday that recent inflation figures have bolstered the Fed’s confidence in its ability to reduce inflation, indicating that the central bank is moving closer to cutting interest rates.
“What increases that confidence is better inflation data, and recently we’ve had some of that data,” Powell said at the Economic Club of Washington, DC.
The Fed Chairman mentioned that he does not expect the Fed to wait until inflation reaches the 2% target before cutting rates, as waiting too long could hinder economic growth.
“This will create momentum for gold and silver prices towards the end of the year,” Citi stated.
Citi’s analysis highlights the impact of the Fed’s previous rate cuts on precious metal prices, noting that “the average annual return on precious metals is 13% in the six months following the Fed’s first rate cut” in the last four cycles.
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