Gold sees sharp short-term swings, but the long-term bullish logic remains solid? Citi looks to $5,000, central bank buying underpins "gold faith"

Gold prices appear to be caught in a tug-of-war between short-term liquidity shocks and long-term allocation demand. As of November 6, spot gold closed at $4,065.63 per ounce, up about 5.1% from the year's low of $3,869.85 on October 30, but still about 27.3% below January's all-time high. The sharp global tech stock selloff led by AI computing-themed shares, falling oil prices and changes in the U.S. political landscape have brought potential interest-rate relief for gold; however, strong U.S. nonfarm payroll data and hedge fund deleveraging demand continue to disrupt gold's rebound. "Deleveraging" mainly refers to hedge funds selling gold to cope with equity losses and margin pressure. Global central banks bought 321.2 tonnes of gold in the third quarter, gold ETFs are attracting funds again, and the recovery in Chinese and Indian jewelry demand brought about by lower prices still support long-term allocation value. Wall Street financial giant Goldman Sachs cut its medium- and long-term gold price targets, while Citi retained its $5,000 target, highlighting that the investment divergence among Wall Street institutions mainly centers on when monetary policy will turn and when private investment demand can join forces with central bank gold buying. Short-term gold volatility coexists with a long-term bullish outlook Gold appears to be seeking support around $4,000 per ounce while grappling with conflicting short-term factors and changes in how it is traded. On November 6, spot gold closed at $4,065.63 per ounce, having recovered from the year-to-date low of $3,869.85 set on October 30. Gold's most recent dip below $4,000 per ounce and subsequent recovery was similar to its performance in July, when prices broke below that key psychological threshold several times before recouping losses. In March, gold also came close to falling below $4,000 per ounce. After hitting an all-time high of $5,594.82 on January 29, gold corrected on profit-taking and fell to $4,097.99 on March 23. Gold's 2026 run has been turbulent, with many Wall Street analyst commentaries focusing on the fact that gold appears to have largely lost its traditional role as a hedge against inflation and geopolitical turmoil. Instead, more speculative trading appears to have emerged in the gold market. However, in recent months, as gold has hovered near the $4,000 per ounce threshold and faced the risk of breaking below it, a large amount of froth and short-term hot money has been flushed out. Yet gold remains directionless in the short term, pulled by conflicting factors and vulnerable to swings in either direction. The main risk comes from equity market weakness, as investors question the AI investment boom, especially after the Democratic Party's landslide victory in the U.S. midterm elections. Many Democrats had questioned the need to continue building more energy-hungry data centers. Falling stock prices tend to force investors to liquidate other assets, and selling gold fits the historical pattern during equity market corrections. But short-term equity weakness could a typically medium-term positive for gold's trading price, especially if the weakness spreads further into the real economy. Gold has struggled since hitting an all-time high in January, partly because U.S. monetary policy expectations shifted, with the market believing interest rates could rise further. However, emerging equity market weakness and the recent drop in crude oil prices driven by renewed hopes for an end to the Iran conflict could once again push monetary policy expectations toward at least neutral, or even toward rate cuts next year. Long-term bullish factors appear to remain solid. If gold's short-term outlook is unclear and depends on stock market and Iran developments, the long-term picture is relatively clear. For global central banks, gold remains an attractive alternative asset, especially as they worry about the long-term U.S. fiscal outlook. Many investors believe U.S. fiscal deficits are unsustainable and that interest payments on the massive debt are consuming too high a share of government revenue. World Gold Council data show global central banks bought 321.2 tonnes of gold in the third quarter, up from 296.3 tonnes in the previous quarter and the highest level since the fourth quarter of 2024. Also noteworthy is that central bank demand is price-sensitive. The weakest demand this year was in the first quarter, when gold hit an all-time high and central banks bought only 57.7 tonnes. The recent drop below $4,000 per ounce may encourage central banks to increase purchases this quarter. Investor interest in gold is also rising. World Gold Council data show gold exchange-traded funds added 19 tonnes of gold holdings in October, extending the third quarter's net inflow of 211.2 tonnes; the third-quarter inflow reversed a 47.3-tonne decline in the second quarter. The third pillar of gold demand is jewelry, dominated by China and India, which together account for nearly two-thirds of global gold jewelry demand. Lower prices in recent months may boost jewelry demand. Indian dealers said consumer buying interest has increased as important festivals approach. World Gold Council data show India's gold jewelry demand in the third quarter was 99.9 tonnes, the highest level since the fourth quarter of last year. China's gold jewelry demand rose to 71.9 tonnes in the third quarter from 55.7 tonnes in the second quarter. Overall, gold's short-term drivers have changed, increasingly relying on speculative trading driven by stock market and crude oil moves, especially how those moves affect monetary policy expectations. But over the long term, the bullish logic supported by asset diversification amid global fiscal concerns and growing jewelry demand in India and China still holds. "Commodity bull market flag-bearer" Goldman Sachs cuts gold target price, Citi looks for oil price inflection point: gold bull market awaits private buying to take over After the Democratic Party won control of both chambers of the U.S. Congress, the market began trading three changes, all of which are favorable for gold prices: a divided government in the future may constrain a new round of large-scale tax cuts and spending increases; data center construction faces stricter scrutiny, which may weaken AI investment's pull on growth and prices; and expectations for easing Middle East conflicts push oil prices lower, reducing energy inflation and upward pressure on U.S. Treasury yields. Combined with safe-haven demand triggered by the sharp tech stock selloff, U.S. Treasuries gained further support. U.S. Treasury Department data show the 10-year Treasury yield fell from 4.94% on October 30 to 4.86% on November 6, down 8 basis points for the week. However, Friday's addition of 165,000 nonfarm jobs and a drop in the unemployment rate to 4.1% re-elevated rate hike bets, pushing the dollar and yields higher, and gold fell more than 1% intraday at one point. Therefore, last week presented a pattern in which U.S. Treasuries preserved their weekly gains while gold's rebound was disrupted by strong employment data. For gold, whether the decline in nominal yields is accompanied by a decline in real yields is directly related to whether the rebound can continue. Over the same period, the 10-year real yield rose from 2.60% to 2.63%, while the gap between nominal and real yields narrowed from 2.34% to 2.23%, indicating that last week's decline in nominal rates was mainly accompanied by a decline in inflation compensation, and the pressure on gold from real rates did not ease in tandem. If the timeline is extended to early October, real yields have indeed fallen significantly, but weekly moves remain choppy. The sustained positive effect of lower oil prices on gold needs to be further reflected in cooling rate hike expectations and falling real rates; before that, margin calls, position compression and cash demand under the hedge fund deleveraging storm triggered by equity losses may still force some institutions and retail investors to sell gold. In a November 5 research note, Goldman Sachs cut its end-2026 gold target to $4,150 from $4,650 and its end-2027 target to $4,800 from $5,400. Its judgment is based on a policy path in which rates will still be raised in December and cuts will not begin until the second half of 2027: central bank reserve diversification demand continues to provide support, but restrictive rates and cooling demand for call options weaken the incentive for private funds to chase the rally. Goldman's forecast assumes central banks buy 60 tonnes of gold per month in 2026 and 2027, still well above the historical average of about 17 tonnes before 2022. Based on $4,065.63, $4,150 and $4,800 imply potential gains of about 2.1% and 18.1%, respectively, reflecting Goldman's restraint on the near-term outlook and its still positive judgment on longer-term allocation value. Citi's recent gold price path relies more on an energy and policy turning point: it set a gold target of $4,500 for the next 0-3 months and $5,000 for 6-12 months, about 10.7% and 23.0% above last Friday's close, respectively. The key premise is the reopening of the Strait of Hormuz and de-escalation of the conflict between Yemen and Saudi Arabia before year-end, driving a significant drop in oil prices and creating room for the Federal Reserve to shift toward easing. Citi's investment logic for gold is that global central bank buying continues to underpin gold, and as U.S. Treasury yields continue to decline due to safe-haven buying and the Democrats regaining a majority in Congress, and energy shocks from Middle East and Russia-Ukraine conflicts fade, real rates and dollar pressure may ease, re-attracting ETFs and trend-following funds to buy gold. It is worth noting that $5,000 is a price target for a specific time window; Citi also cut its full-year 2027 average gold price forecast to $4,700, showing it likewise expects bumps in the recovery process. The difference between long-term demand and short-term pricing is precisely the key to understanding the judgments of the two institutions. Central bank gold purchases rose to 321.2 tonnes in the third quarter from 296.3 tonnes in the previous quarter, and gold ETFs added 211.2 tonnes in the third quarter and another 19 tonnes in October, indicating that reserve diversification and investment demand still exist. In addition, new U.S. fiscal expansion being checked can improve the marginal supply-demand outlook for U.S. Treasuries, but will not quickly eliminate existing debt scale and reserve safety concerns, and therefore does not necessarily weaken the long-term allocation case for gold. Stephen Innes, a macro market strategist and FX and commodities expert in the international financial community, interpreted Goldman Sachs' research report by emphasizing the other side: continued central bank gold buying does not mean a commitment to defend a certain price level, and for gold to form a smoother uptrend, private investors still need to reduce selling and re-engage in allocation. The key combination for the next sustained rally is easing real rate pressure, easing cross-asset deleveraging, and long-term buyers and private funds once again moving in the same direction on a large scale.