Citi: Gold price outlook depends on the Middle East situation; base-case 3-month target price of $4,500.

Citi released a research report stating that the gold price outlook will depend on the development of the Middle East situation. In the base case, with an indicative probability of 60%, if the Strait of Hormuz reopens before the end of 2026 and the conflict between Yemen and Saudi Arabia de-escalates, the bank expects gold prices to have significant upside potential, with a 0-3 month target price of $4,500 per ounce and a 6-12 month target price of $5,000 per ounce. Citi noted that a notable pullback in oil prices could prompt the Federal Reserve to shift toward rate cuts, driving gold investment demand and rekindling gold's momentum bull market. In addition, falling oil prices could also support gold buying in emerging markets by increasing purchasing power. In the bull case, with an indicative probability of 10%, Citi assumes the United States and Iran quickly reach an agreement, oil prices fall significantly, prompting a rapid dovish shift by the Federal Reserve, leading to a sharp weakening of the dollar and a recovery in cross-asset risk appetite, and gold prices could rise further. In the bear case, with an indicative probability of 30%, the bank expects the Strait of Hormuz to remain blocked, in which case further downside for gold prices would be limited, with a possible low of $3,500 per ounce.