Increasing economic worry amid a tariff-fueled trade war has caused gold prices to surge this year.
So far, gold has rallied 30% in 2025, including a 13% gain over the past three months. Much of the gains follow President Trump’s tariff announcements, including on April 2, so-called ‘Liberation Day’.
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Gold’s big returns are particularly impressive compared to other assets, including stocks and bonds. The S&P 500 is up about 2% this year, and the 10-year Treasury Note yield has climbed to 4.41% from below 4% ahead of the new tariffs.
The rally in gold has likely caught the attention of many investors, who are wondering if the yellow metal still has room to run.
This week, commodities analysts at Citigroup tackled the matter, unveiling a new gold forecast and price target.
Gold prices have surged 30% in 2025 amid growing economic uncertainty.
Image source: Costaseca/Lucas/AFP via Getty Images
Gold prices jump as economic and geopolitical worry mounts
The U.S. economy is facing its stiffest challenge since 2022, when skyrocketing inflation caused the Fed to pivot from a zero interest rate policy to the most aggressive pace of rate hikes since the 1980s.
Inflation has proven stickier than hoped, and job losses are rising and could worsen as tariffs bite are felt through supply chains in the coming months.
Although the White House has paused many reciprocal tariffs announced on Liberation Day, tariffs of 25% remain on Canada, Mexico, and autos. A 10% baseline import tax applies to most other imports. Meanwhile, new China tariffs of 30% have increased total tariffs above 50% on everything from clothing to car parts.
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Unemployment has increased to 4.2% from 3.4% in 2023, and layoffs year-to-date exceed 696,000, according to Challenger, Gray & Christmas, up 80% year-over-year through May.
Meanwhile, inflation has made little progress since last fall. In May, the Consumer Price Index showed inflation up 2.4% from one year ago, unchanged from September.
Inflation’s stalled decline and job market cracks have trapped the Federal Reserve in a box, trapped by its mandate.
The Fed’s mission is to maintain low employment and inflation, two often competing and contradictory goals. Raising rates lowers inflation but increases joblessness, while lowering rates increases inflation but boosts employment.
Toss into the mix the uncertainty associated with tariffs’ impact on inflation this year, and it’s not hard to understand why the Fed is stuck on the sidelines, unwilling to risk fanning inflationary flames by cutting rates even as economic data disappoints.
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ISM’s manufacturing index was 48.5 in May, down from 50.9 in January. Its services index fell to 49.9 from 54 in December. Historically, readings below 50 signal a contracting economy.
If that wasn’t enough of a concerning backdrop supporting gold, there’s more.
The US deficit is projected to be near $2 trillion in 2025, and mounting US debt has left many wondering if Treasury bond obligations will someday need to be renegotiated, making them less appealing than normal.
And let’s not forget chaos in the Middle East. Israel’s attack on Iran and Iran’s response have fueled additional uncertainty, sending crude oil prices higher– yet another inflationary threat. This month, West Texas Intermediate crude prices have surged by 18% to $73.67.
Analyst makes bold gold market call after rally
Gold’s price surge to over $3,400 has lifted it to all-time highs, which may signal that speculators have become overly bullish and complacent.
The risk that gold bugs have become too optimistic isn’t lost on Citigroup, whose commodities analysts released a new gold price outlook this week.
The analysts’ latest take on gold is anything but glittering.
Citi says gold demand may weaken as we move beyond summer and stretch into next year, potentially leading to a drop in gold prices to between $2500 and $2700 by the end of 2026.
Fewer shocks driving gold interest and improving optimism over the economy ahead of midterm elections and following new tax cuts, including tax relief for social security recipients, would contribute to the drop in demand.
Easing economic tensions could also help Treasury bonds chip away at gold’s lead, with gold being worth $200 per ounce less for every 1% decline in interest rates.
Citi’s baseline near-term and six- to 12-month gold price targets are $3,300 per ounce and $2,800 per ounce, down from $3,500 and $3,000 previously.
It expects a range of between $3,100 and $3,500 in the third quarter, leaving little upside reward for new gold investors.
