Analyzing Citibank’s Call for Gold amid Recent Slump



Brighter near-term outlook

As precious metals have been significantly affected following the Brexit vote, some major banks in the financial world are giving their takes on gold. For investors, it’s important to have an idea of what the big bankers are pointing toward and what the major price indicators are for precious metals.

With the chances of an interest rate hike down, Citibank seems to have a positive outlook on gold, at least in the near term. However, it acknowledges the possibility of a hike in December 2016.

Article continues below advertisement

Gold holdings

Reduced physical demand for gold from the Asian market in 1Q16 was also considered when creating a precious metals outlook. However, second-quarter demand could rebound due to seasonality.

Citibank also said that the ETF holdings of gold could rise by almost 100 tons per month in the current year. The near-term forecast remains robust.

Gold has surged by ~25% in the current year, and fund flows into the famous gold-based SPDR Gold Shares ETF (GLD) have also surged considerably in the year. After the Brexit turmoil set into the Market, fund flows to GLD rose, as we can see in the above chart.

The fund has seen a year-to-date (or YTD) rise of 24.5%. Another gold-based fund, the Physical Swiss Gold Shares ETF (SGOL), has also seen a YTD rise of 24.5%. Such funds often closely track the performance of gold on a daily basis.

In our next article, let’s look at how Citibank is segregating further movements in gold.


More From Market Realist