Citigroup (C) has forecast that gold prices (GC=F) could reach $3,000 per ounce over the next few months. The analyst behind the call, Citi North America Head of Commodities Research Aakash Doshi, joins Yahoo Finance to discuss his outlook.

Doshi states that the "big driver" behind his $3,000 per ounce target is the expectation that financial demand for gold will "catch up to what is strong physical" demand. He notes that demand has surged in the post-pandemic period, with central banks in emerging markets buying "record amounts of gold," solidifying the strength in the "physical demand pool."

According to Doshi, the heightened central bank buying has served two critical functions: "It has lifted the gold price floor and it's also damped downside price volatility." He explains that central bank demand, which accounts for 25 to 27% of annual gold consumption, is an important factor supporting the market.

With gold already trading at "all-time highs," Doshi believes the support base for gold prices will lie between $1,900 and $2,000 per ounce, with the commodity expected to trade "above that benchmark" going forward.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance.

This post was written by Angel Smith

Video Transcript

MADISON MILLS: As Citi forecasting that the precious commodity could have even more room to run, predicting that gold could hit $3,000 in the next couple of months.

To break down his call for us, we have Aakash Doshi, Citi North America head of commodities research. And thank you so much for being here with us this morning to talk about gold.

This morning in our meeting, we were talking about folks running to Costco to buy gold bars versus folks who are investing in it via the market here. I'm curious from your perspective, what should investors know about the difference between those two and the room that gold has to run in this rally moving forward?

AAKASH DOSHI: Well, it's great to be back with "Yahoo Finance." I remember in the summer of 2019, I was in your studios calling for $2,000 an ounce as a base case over the next 12 months at that time.

Now, we think $3,000 an ounce is in play over the next year or so. And the big driver for that is that we think financial demand for gold is only catching up to what is strong physical.

You just talked about the Costco bar and coin sales. Well, that is a global trend. We've seen bar and coin demand surge since the pandemic. It's now above pre-COVID trend. And that we think represents a strong alternative Fiat demand story.

Separately, we see the official sector, central banks in the emerging markets to be, in particular, to buy a record amount of gold over the last several years, including over 1,000 tons in 2024, which would be the third highest since 1967.

We think this physical demand pull is structural. It is strong. It is driven by a host of factors. And financial demand for gold is only catching up to that. If you look at the gold price performance since the February lows, we're up around 20%.

It hasn't been a weaker dollar. The dollar is higher. It hasn't been lower real or nominal rates at the belly of the US Treasury curve. Those are at year-to-date highs. So we think the risk skew right now is still bullish for gold in the medium term, as financial, macro factors will catch up to what has been strong physical that has supported the gold market over the past year.

SEANA SMITH: When we're talking about the biggest driver, I think, that's really up for debate, when people are trying to figure out how high the price of gold can go. Is it the central bank buying? Or is it some of those macro factors that you were just talking about?

AAKASH DOSHI: I think over the last couple of years, it has been central bank buying that has, at least, done two things. It's lifted the gold price floor. And it's also damped downside price volatility. If I was in your studios a couple of years ago, and I told you that the Fed was going to hike to 5 and a quarter to 550%, that real yields at the belly of the US curve are going to go from negative territory to plus 200 basis points.

I don't think many people would have thought that gold is going to average $1,800 to $1,900 over those last couple of years. And then break out to all-time nominal highs in 2024. So we do think the central bank demand story is important, because they're now absorbing 25% to 27% of annual gold mine production.

And like I said, the alternative Fiat demand story also seems to be gaining legs and gaining traction. If I look at global debt loads, outstanding public and private, since the pandemic from 2020 to 2023, that grew 20% to 25% to $315 trillion. I think, at some point, it just was a breaking mark for gold investors and gold bugs.

And to that end, we think that post-financial crisis, where you saw $1,000 an ounce turn from a gold price ceiling to a gold price floor. That we might now be in a period where $1,900 to $2,000 an ounce gold is actually a support base. And that prices are now going to trade higher for longer above that benchmark.