Why Citi Thinks Gold Will Shine (Then Dim) in 2026

Gold just hit $2,700 an ounce, and Citigroup thinks there's more room to run—at least for now. In a recent research note, the bank outlined why geopolitical risks will continue supporting the precious metal, even as they expect some softening in the latter half of 2026.

The Fear Premium Driving Gold Higher

Citi's analysts point to a perfect storm of uncertainty fueling gold's rally. The ongoing war in Ukraine, escalating tensions in the Middle East, and the broader US-China strategic competition have investors scrambling for safe havens.

But it's not just retail investors driving demand. Central banks worldwide have been aggressive buyers of gold, particularly since Russia's exclusion from the SWIFT payment system exposed the risks of dollar dependency. Countries are quietly diversifying their reserves, reducing reliance on any single currency.

The numbers tell the story: central bank gold purchases reached 1,037 tons in 2023, the second-highest annual total on record. This institutional demand provides a solid floor under prices, even when other factors might suggest weakness.

Why 2026 Could Mark a Turning Point

So why does Citi expect gold's momentum to fade in late 2026? Several factors could converge to reduce the metal's appeal.

First, geopolitical tensions may begin to resolve. While predicting the end of conflicts is notoriously difficult, historical patterns suggest that even the most intractable disputes eventually find some form of resolution or stabilization.

Second, monetary policy could shift. The Federal Reserve's current dovish stance has been gold-friendly, but if inflation resurges or the economy overheats, higher interest rates would make yield-bearing assets more attractive relative to gold.

Finally, technological disruption in the financial sector—from digital currencies to new payment systems—could reduce gold's traditional role as a store of value, particularly among younger investors.

What This Means for Your Portfolio

For investors, Citi's forecast presents both opportunity and caution. The near-term outlook suggests gold could continue outperforming, especially if geopolitical risks escalate further.

But the bank's longer-term view raises important questions about timing and allocation. Gold has delivered impressive returns—up roughly 25% year-to-date—but it's also notoriously volatile and produces no income.

Institutional investors are taking note. Goldman Sachs recently raised its 12-month gold target to $2,900, while JPMorgan maintains a more conservative outlook, citing potential dollar strength.

The divergent views highlight gold's unique position in today's markets: simultaneously a hedge against uncertainty and a speculative play on continued global instability.