Shocking prediction emerges: Gold fever is about to cool down?

(Dan Tri) - Amid the global gold rush, Citigroup surprised with its prediction that gold prices could plummet in 2026 after a series of "hot increases" due to economic instability and trade wars.

This year has seen a spectacular acceleration in the price of gold - a traditional safe-haven asset - as a series of negative impulses simultaneously hit: the US economy faltered, tariff policies escalated and geopolitical tensions flared up fiercely.

Since the beginning of the year, the price of gold has increased by 30%, with a 13% increase in the last 3 months. The peak was on April 2 (called “Liberation Day” by investors) when President Donald Trump unexpectedly announced a new tax package, causing shockwaves in the global market and a sharp increase in the price of gold.

Gold outperformed other investment channels. The S&P 500 index edged up just 2%, while the yield on the 10-year US government bond jumped from under 4% to 4.41% - a high not seen since 2022. In a context of rising uncertainty, money quickly sought gold as a lifeline.

Tariffs, layoffs, war: A series of variables "blowing" gold to the top

This period is considered the biggest challenge for the US economy since 2022 when explosive inflation forced the Federal Reserve (Fed) to leave the 0% interest rate policy and start the most aggressive interest rate hike cycle since the 1980s.

Now the Fed’s dilemma is even more daunting. Inflation remains high while the labor market continues to deteriorate. The unemployment rate has risen to 4.2%, significantly higher than last year’s 3.4%. In the past five months alone, the U.S. has recorded more than 696,000 layoffs, up 80% from the same period in 2024, according to data from Challenger, Gray & Christmas.

Meanwhile, the consumer price index (CPI) in May remained unchanged at 2.4% year-on-year, the same level as last fall. The Fed’s inability to cut interest rates despite a weakening economy reflects a “dilemma”: raising interest rates to curb inflation will worsen unemployment, but lowering interest rates risks a resurgence of inflation.

Record-high tariffs—particularly on imports from China (30%), Canada, Mexico, and autos (25%)—continue to distort supply chains and add to consumer costs. A range of essential goods, from food to clothing to auto parts, are now subject to import tariffs in excess of 50%.

Gold prices have surged 30% in 2025 amid growing economic uncertainty (Photo: Getty).

Not only internal factors, global variables are also contributing to strengthening the upward momentum of gold.

The US federal budget deficit is forecast to approach $2 trillion this year, raising concerns about the government’s ability to repay its debt. If this doubt spreads, US government bonds, which are considered “safe” assets, will gradually lose their appeal, creating conditions for gold to rise to replace them.

Adding to the tensions, the Middle East has been increasingly tense as Israel and Iran continue to retaliate against each other, causing WTI oil prices to rise 18% in June to $73.67 a barrel. Rising oil prices will continue to put pressure on global inflation, which could make gold even more popular as a hedge against risk.

Citi warns: “Gold rush” won’t last

However, not everyone believes that the gold rally will continue. In its latest report, Citigroup's commodity analysis department made a surprising prediction: gold prices could reverse sharply in the next 18 months.

According to Citi, gold will trade around $3,300/ounce in the short term, before falling to the $2,500-2,700/ounce range by the end of 2026, as macro risks ease and market confidence recovers.

“As the economy stabilizes, inflation expectations decline and tax packages are eased, especially for low-income groups, gold demand could cool rapidly,” Citi said.

In addition, Citigroup estimates that for every 1% drop in interest rates, gold prices will lose about $200 an ounce due to the increased attractiveness of government bonds. This is a completely possible scenario if the Fed is forced to ease policy in 2026.

The firm’s medium-term forecast for gold is $2,800 an ounce over the next 6-12 months, down from its previous estimate of $3,000. In the third quarter of 2025, the precious metal is expected to trade in the $3,100-$3,500 range, representing a strong resistance level for new investors entering the market.

This year’s gold rush may be one of the strongest in a decade, but as Citigroup warns, nothing goes up forever. In a volatile world, investors need to keep a cool head and a long-term eye rather than chasing the occasional “wave.”

Source: https://dantri.com.vn/kinh-doanh/xuat-hien-du-bao-gay-soc-con-sot-vang-sap-ha-nhiet-20250618181850810.htm