Despite the complex demand for gold and the outstanding performance of official departments and over-the-counter investments, the Chinese and jewelry markets are showing signs of fatigue, and Citigroup's global research department maintains a firm bullish attitude towards gold prices.

The institution predicts that the price of gold will continue to rise, with a short-term target of $2500 per ounce and a target of $3000 per ounce over the next 12 months.

Dynamic demand analysis

Official sector purchases: Although the People's Bank of China (PBOC) recently suspended purchases in the report, the central bank's gold demand remains strong. Citigroup expects that due to de dollarization and diversified reserves, the official sector's gold holdings will continue to grow, with demand expected to reach 941 tons by 2024.

Off exchange trading and ETFs: The demand for off exchange trading has surged, with a year-on-year growth of over 50% in the second quarter of 2024, driving gold consumption to a seasonal high. The once stable outflow of gold ETFs began to reverse at the end of the second quarter of 2024, with net inflows accelerating in July. Citigroup expects a net inflow of 50 tons in 2024 and 275 tons in 2025, indicating an increasing trend in investor demand for gold.

China and Jewelry:

On the other hand, the demand for gold in China and the jewelry industry has weakened. It is expected that China's retail demand will continue to be weak in the third quarter and may rebound later this year. Affected by high prices and inflationary pressures, jewelry demand has significantly decreased, with a forecast for 2024 showing a year-on-year decline of 9.5%.

Investment demand and market trends

Analysts point out that the outlook for gold prices remains positive as physical investment demand is expected to increase to 83% and 85% in 2024 and 2025, respectively. This high level of investment demand is reminiscent of the bullish phase in the gold market, supporting the prediction that gold prices will reach $3000 per ounce within the next 12 months.

Citigroup also pointed out that the dynamic changes in the gold market, driven by sustained central bank purchases, strong off exchange demand, and potential improvement in ETF inflows, may mitigate the impact of weakened retail and jewelry demand.