Citi Calls Time on Gold’s Rally on Slumping Demand, Fed Cuts

Commodity

Summary:

Citi expects gold prices to fall to $2,500–$2,700 by late 2026 due to weaker demand, Fed rate cuts, and improved global growth. It remains bullish on aluminum and copper.

Gold is expected to sink back below $3,000 an ounce in the coming quarters as a record-setting run peters out, according to Citigroup Inc., calling time on one of the standout rallies in commodities.

“Our work suggests that gold returns to about $2,500 to $2,700 an ounce by the second half of 2026,” analysts including Max Layton said in a report. The slump may be driven by weaker investment demand, improving global growth prospects, and rate cuts by the Federal Reserve, they said.

Bullion has soared almost 30% this year, setting a record in April, as US President Donald Trump’s disruptive trade policies and the crisis in the Middle East spurred haven demand. The metal’s ascent has also been underpinned by concerns about the US deficit and assets, as well as by consistent buying by central banks as they sought to diversify reserves.

Declining investment demand for gold from the fourth quarter of 2025 may come from “any modest improvement in global growth confidence” as a stimulatory US budget takes effect, and Trump’s trade and other policies become less bearish, the Citi analysts said. Further, “we see a lot of scope for the Fed to cut from restrictive policy to neutral,” they added.

In the bank’s base case — which carried a 60% probability — gold was expected to consolidate above $3,000 an ounce over the next quarter, then head lower. Its bull case — with 20% odds — flagged scope for a fresh record in the third quarter on concerns about tariffs, geopolitics and stagflation. The bear case — also at a 20% chance — saw a selloff, in part on speedy tariff resolutions.

Spot gold last traded near $3,388 an ounce. Prices fluctuated on Tuesday, after Trump first called for an evacuation of Tehran amid the conflict between Israel and Iran, then departed from a Group of Seven summit early.

In outlooks for other metals, Citi said it was very bullish on both aluminum and copper. The lightweight metal “is highly leveraged to an uptick in global growth and sentiment,” the analysts said.

Source: Bloomberg

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Adam

In a year of shocks, turmoil, and tariffs, investor sentiment has been whipped to and fro as the crowd struggles to assess the outlook for risk and reward. But as 2025 approaches its mid-point, stocks in the industrial sector have found their footing and are now the performance leader, based on a set of ETFs through Monday’s close (June 16).

The Industrial Select Sector SPDR® Fund (NYSE:XLI) is up 9.3% year to date, modestly ahead of communications (XLC), the second-best performer. The premium is considerably higher compared with the broad stock market (SPY), which is up 3.1% so far this year.

Most of the equity sectors are posting gains in 2025, with two exceptions: healthcare (XLV) and consumer discretionary (XLY)), the latter falling 4.3% year to date.

The current debate is how the market will navigate the ongoing Israel-Iran conflict, which threatens to pull the US into a new phase of Middle East fighting. A key macro concern: oil prices will remain elevated because of the attacks, raising inflation and lowering economic growth.

Torsten Sløk, chief economist at Apollo, advised that the Federal Reserve’s model of the US economy estimates that a $10-a-barrel-increase in oil translates to an increase in inflation by 0.4% and lower GDP by 0.4%.

Crude oil has rallied sharply in recent weeks, and traded above $70 a barrel for a second day on Monday, based on the US benchmark WTI. That compares with the recent low in the mid-$50 range.

Jeff Buchbinder, chief equity strategist at LPL Financial, notes that his analysis of 25 geopolitical shocks since the Pearl Harbor attack in 1941 indicate that stocks have been mostly resilient during those events. Total drawdowns around these events have averaged 4.6% over an average of roughly 19 days, he reports.

The US stock market (S&P 500) was up yesterday, and remains close to its record high, which was set in February. For the moment, the Israel-Iran conflict has had limited, if any, effect on American shares. Analysts predict more of the same if the fighting remains contained between the two countries with minimal US involvement.

Source: investing

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Olivia Brooks

Economic

Central Bank

The Federal Reserve will consider plans to ease leverage requirements on larger banks at a meeting later this month, kicking off what is expected to be a broad effort to reconsider bank rules.

The U.S. central bank announced the board meeting, scheduled for June 25, to discuss changes to the so-called "supplementary leverage ratio," which requires banks to set aside capital against assets regardless of their risk.

The meeting will be the first following Fed Governor Michelle Bowman's confirmation as the central bank's top regulatory official. It could be the first of several rule-easing projects at the Fed as Bowman, a Republican tapped by President Donald Trump, has charted an ambitious plan for overhauling how the central bank regulates and monitors some of the nation's largest and most complex banks.

The Fed did not provide any details on the proposal under consideration, but banks have clamored for years for changes to the supplementary leverage ratio, potentially by exempting traditionally safe assets or revising the formula used to calculate the requirement.

The industry has argued the requirement was meant to serve as a baseline, requiring banks to hold capital against even very safe assets, but has grown over time to become a binding constraint on lending, and can actually hinder their abilities to intermediate Treasury markets during times of stress.

Source: Yahoo Finance

To stay updated on all economic events of today, please check out our Economic calendar

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Adam

Economic

Global oil demand will keep growing until around the end of this decade despite peaking in top importer China in 2027, as cheaper gasoline and slower electric vehicle adoption in the United States support consumption, the International Energy Agency said on Tuesday.

Despite seeing an earlier demand peak for China, the IEA, which advises industrialised countries, stuck to its prediction that global demand will peak by 2029. This view sharply contrasts with that of producer group OPEC, which says consumption will keep growing for much longer.

Oil demand will peak at 105.6 million barrels per day (bpd) by 2029 and then fall slightly in 2030, a table in the Paris-based IEA's annual report shows. At the same time, global production capacity is forecast to rise by more than 5 million bpd to 114.7 million bpd by 2030.

A conflict between Israel and Iran has highlighted the risk to Middle East supplies, helping send oil prices up 5% to above $74 a barrel on Friday. Still, the latest forecasts suggest ample supplies through 2030 if there are no major disruptions, the IEA said.

"Based on the fundamentals, oil markets look set to be well-supplied in the years ahead," said IEA Executive Director Fatih Birol in a statement. "But recent events sharply highlight the significant geopolitical risks to oil supply security," Birol said.

In a separate report on Tuesday, which included a commentary on the market impact of the Israel-Iran conflict, the IEA said the world market looks well supplied this year in the absence of a major disruption as growth in supply exceeds that of demand.

Global supply in 2025 will rise by 1.8 million bpd, up 200,000 bpd from last month, the IEA said. This is partly because OPEC+, which groups the Organization of the Petroleum Exporting Countries plus Russia and other allies, is raising output.

World demand in 2025 will rise by a much lower 720,000 bpd, the IEA said, down 20,000 bpd from last month's forecast.

CHINA PEAK

After decades of leading global oil demand growth, China's contribution is sputtering as it faces economic challenges as well as making a big shift to EVs.

The world's second-largest economy is set to see its oil consumption peak in 2027, following a surge in EV sales and the deployment of high-speed rail and trucks running on natural gas, the IEA said. In February, it predicted China's demand for road and air transport fuels may have already peaked.

China's total oil consumption in 2030 is now set to be only marginally higher than in 2024, the IEA said, compared with growth of around 1 million bpd forecast in last year's report.

By contrast, lower gasoline prices and slower EV adoption in the United States, the world's largest oil consumer, have boosted the 2030 oil demand forecast by 1.1 million bpd compared with the previous prediction, the IEA said.

U.S. electric vehicles are now expected to account for 20% of U.S. total car sales in 2030, down from 55% assumed last year, the report said.

Since returning to office, U.S. President Donald Trump has demanded OPEC lower oil prices and has taken aim at EVs through steps such as signing resolutions approved by lawmakers barring California's EV sales mandates.

Source: Reuters

To stay updated on all economic events of today, please check out our Economic calendar

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Devin

Political

U.S. President Donald Trump speaks to reporters aboard Air Force One after departing early from the the G7 summit in Canada to return to Washington, June 17, 2025.

President Donald Trump on Tuesday warned Iran leader Ali Khamenei that he is an "easy target" and that "our patience is wearing thin," before demanding Tehran surrender in its conflict against Israel.

Source: CNBC

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Adam

Cryptocurrency

Crypto companies are investing in Democrats as they seek to muscle an industry-friendly regulatory regime through Congress and ensure new laws persist after President Donald Trump leaves office.

Cryptocurrency exchange Coinbase Global Inc. added David Plouffe, a former senior adviser to Kamala Harris’ 2024 presidential campaign and Barack Obama aide, to its global advisory council last week. Meanwhile, stablecoin giant Tether Holdings SA recently registered Lilette Advisors, a firm founded by staffers for former President Joe Biden, as their lobbyist, according to public disclosures filed at the end of May. Ankit Desai, a partner of the firm who used to work for Biden, is listed as El Salvador-based Tether’s only lobbyist in the registration.

“In the long run, Democrats are likely to take power back in at least one of these chambers or the presidency,” said Austin Campbell, an adjunct professor at New York University’s Stern School of Business and the head of the stablecoin company WSPN USA. “So if you made this industry explicitly partisan, boy do you have a problem.”

Last month, venture capital firm Andreessen Horowitz, one of crypto’s largest investors, hired Michael Reed, formerly a top adviser to House Minority Whip Katherine Clark, as a government affairs partner. The founders of what’s known as a16z were among the largest donors to Trump’s 2024 presidential campaign.

Democrats are essential to advancing crypto legislation in the Senate, where 60 votes are needed to clear procedural hurdles for most bills.

Crypto’s massive spending on campaigns aiding crypto-friendly Democratic Senate candidates and opposing crypto skeptics paid off on June 12, when the chamber voted 67-27 to cut off debate on landmark stablecoin legislation known as the GENIUS Act. Sixteen Democrats voted with the Republican majority, with final passage of the bill expected Tuesday, despite Republicans successfully blocking Democratic efforts to amend the measure to block Trump from profiting off of his many crypto ventures.

Crypto companies have become increasingly worried the stablecoin measure, which also must pass the House, might be the only digital asset legislation signed into law. They are pushing to ensure broader market structure legislation — advanced last week by the Financial Services and Agriculture committees on bipartisan votes — doesn’t stall.

Banking Chair Tim Scott, a Republican from South Carolina, told Bloomberg News he anticipates holding a hearing on that broader measure in July, but doesn’t expect Senate action until the fall. Some other Republicans however want the House to package both bills together.

“Time is your enemy when you’re trying to pass a bill,” Campbell said. “Everybody comes out of the woodwork to try to staple completely unrelated stuff onto it. That’s how we end up with these giant thousand page omnibus bills that do 80 different things.”

Democrats initially united to filibuster the legislation earlier last month amid a furor over Trump’s crypto dealings, with progressive Senators Elizabeth Warren of Massachusetts and Jeff Merkley of Oregon leading demands that the president be barred from profiting off his memecoin and a separate stablecoin venture.

Two Senate Republicans voted to filibuster the stablecoin bill. Josh Hawley of Missouri had sought to amend the bill to block large technology companies from issuing their own stablecoins. And Rand Paul of Kentucky wanted to add an amendment requiring an audit of the Federal Reserve. An effort by retailers and their allies in the Senate to mandate competition in credit card processing also failed to get a vote amid Republican infighting. Coinbase has been lobbying to allow interest to be paid on stablecoin accounts, but those efforts have so far been unsuccessful in persuading lawmakers in the House or the Senate.

While hostility to the Biden Administration’s regulatory policies led many major crypto participants to support Trump’s most recent campaign, the crypto industry has not always leaned Republican. Sam Bankman-Fried, the disgraced co-founder of crypto exchange FTX, was the second-biggest individual donor to Democrats in the 2022 election cycle. Many members of Congress shied away from crypto after his exchange collapsed and politicians ended up returning Bankman-Fried’s funds.

Last week, the House Financial Services and Agriculture committees advanced the Digital Asset Market Clarity (CLARITY) Act, informally referred to as crypto’s market structure bill. The House has been moving swiftly on the far more complicated piece of legislation, but not without rifts between Democrats and Republicans over amendments targeting Trump’s crypto profits. The CLARITY Act aims to provide a comprehensive regulatory framework, including delineating responsibilities between the Commodity Futures Trading Commission and the Securities and Exchange Commission.

“Market structure is a whole different kettle of fish,” Campbell said. “They’re trying to boil the ocean with that bill and it’s going to have a lot of knock on effects they have not thought about.”

Source:Bloomberg

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Adam

Economic

It doesn't take much to spook investors.

For several months the broader macro environment has functioned like a grab bag of justifications to close out and watch from afar. Trade uncertainty, an unmoving Fed, and turmoil in the Middle East have kept money on the sidelines. And by the time you are reading this, those storylines will have already changed.

Sensitivity to global events has also worked in investors' favor. It takes a lot to get the market down for a 10 count, even if it trips and even falls on a semi-regular basis. Being unfazed has yielded powerful returns as the S&P approaches the prior highs of February. But for as much as fickleness has defined Wall Street, optimism has a track record of rolling over negative catalysts in a year full of them.

For those surprised at how resilient the markets have been despite the swirling geopolitical headlines, analysts have pointed to several factors that are motivating investors. Jeff Buchbinder, chief equity strategist at LPL Financial, wrote in a note on Monday that the parties behind the hostilities between Israel and Iran are likely interested in keeping the conflict contained, and that investors are also banking on limited disruption of oil production facilities.

Jitters over the potential for a widening of the violence appeared to have been calmed amid a report that Tehran is looking to deescalate the conflict. On Monday, oil prices eased lower in a new sign that investors don't believe a protracted war — and fresh energy pricing pressures — will ensue this summer.

As for the Fed, many central bank watchers expect officials to stick with their cautious approach, even or perhaps especially because of heightened uncertainty. Bill Adams, chief economist for Comerica Bank, wrote in a note on Monday that the Fed is likely to adhere to a plan of "patience" and "wait and see" as officials analyze how the mix of higher tariffs and tax cuts will impact the economy.

The Fed isn't coming to the rescue, at least for a few more months. But as far as the stock market is concerned, even with mounting external events, there isn't much that needs rescuing.