(Kitco News) – The current pullback in gold prices is very temporary, as the Federal Reserve will deliver multiple rate cuts which will propel gold prices to $3,000 in the next 12 months, according to Max Layton, Global Head of Citigroup Commodities Research.
In an interview with Bloomberg TV earlier on Friday, Layton was asked how focused his team is on the role of the dollar in metals markets, including the potential impact of the interest rate path.
“We certainly think about that,” Layton said. “The house view is quite out of consensus, Citi Research’s house view. We’ve got five Fed cuts this year, lowering rates into the end of the year, early next year, and that’s certainly going to be, we think, the backbone of the next move higher in gold.”
Layton said Citi believes gold is the asset most leveraged to that kind of move in interest rates. “We’ve got it going to $3,000 over the next 12 months,” he said.
When asked about the market only fully pricing in one rate cut this year, and where that would leave gold prices, Layton acknowledged this would necessarily rein in their projections.
“Certainly, it would make us less bullish,” he said. “But the underlying drivers of gold are very physical at the moment, so we feel like there’s support for these gold prices. Obviously, gold’s broken the relationship with real rates of late, and that’s been all about the colossal Chinese retail demand, I mean, off the charts.”