Since the beginning of this year, spot gold has repeatedly reached new highs. Looking ahead, how will gold prices move in the future?
In a research report released on the 28th, Citigroup believes that three abnormal situations currently exist in the gold market: spot prices are at historical highs, U.S. interest rates are extremely high, and the U.S. dollar is relatively strong.
Under the combined effect of these anomalies, Citigroup predicts that the profit margins of gold producers have reached their highest level in 40 years. In other words, this is a &#34;once in 40 years&#34; great opportunity for gold mines.
The report predicts that by the fourth quarter of 2025, gold prices could reach $3,600 per ounce. The market's investment demand for gold remains high, while concerns about the U.S. stock market and economic growth are the main drivers of investment in 2025.
<h2>Three Abnormal Phenomena Driving Up Gold Mine Profits</h2>
The report points out that the profit margins of gold producers are currently at their highest historical levels since the 1980s, mainly due to high gold prices and relatively low production costs.
Using a 5-year forward price calculation, the marginal profit margin of gold producers has reached its highest level in 40 years, providing producers with significant profit space.
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The 5-year forward gold price is predicted to be $3,650 per ounce, with a huge gap of up to $1,700 per ounce compared to the 90% complete extraction cost curve.
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The report indicates that the surge in gold mine profit margins is caused by three main market anomalies:
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<li>Spot prices are at historical highs. The report notes that the 5-year forward price of gold is about 20% higher than the spot price (on the right), which is the highest premium in nearly twenty years, mainly due to high U.S. interest rates.</li>
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<li>U.S. interest rates remain high. The report emphasizes that high interest rates are a key factor affecting gold forward prices, keeping the 5-year forward price elevated.</li>
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<li>The U.S. dollar is relatively strong. The strength of the dollar also affects gold prices and forward prices, further pushing up the forward price premium.</li>
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The report emphasizes that this phenomenon in the gold market is unique. Compared to other commodities (such as copper and oil), there is a disconnection between long-term gold prices and marginal costs. Long-term prices for copper and oil typically align with their marginal production costs
The reason for this difference is that gold market producers hedge relatively less, while consumers (mainly central banks) have a high demand for physical gold, leading to relatively high liquidity in the long-term gold curve.
<h2>Citigroup: New Opportunities in the Gold Market</h2>
Using the 5-year forward price calculation, the marginal profit margin for gold producers has reached its highest level in 40 years, providing significant profit space for producers.
The report points out that with the decline in U.S. interest rates, there may be an impact on the 5-year forward gold price. The report predicts that by the end of the year, lower U.S. interest rates may cause the 5-year forward gold price to drop by about $200 per ounce.
Additionally, as gold prices are at historical highs, the supply of jewelry scrap gold may also increase. The report estimates that jewelry inventory is about 100,000 tons, and even if the scrap gold recovery rate increases by just 0.5%, it would add 500 tons to the supply, equivalent to 15% of mine supply.
Citigroup also noted that gold investment accounts for over 90% of mine supply and is still rising, which is driving up gold prices. The report predicts that by the fourth quarter of 2025, gold prices could reach $3,600 per ounce. The report believes that investment demand for gold remains high, and concerns about the U.S. stock market and economic growth are the main drivers of investment in 2025.
Citigroup predicts that official sector demand for gold will remain strong, especially in the &#34;Trump 2.0 era.&#34; Following the Russia-Ukraine conflict, official sector demand for gold surged, primarily driven by emerging market demand, which is expected to remain strong in the Trump 2.0 era.
Risk Warning and Disclaimer
The market has risks, and investment should be cautious. This article does not constitute personal investment advice and does not take into account individual users' specific investment goals, financial conditions, or needs. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Investment based on this is at one's own risk

Citigroup pointed out in its latest research report that there are three abnormal phenomena currently in the gold market: high spot gold prices, high U.S. interest rates, and a strong dollar, which have led to gold producers' profit margins reaching the highest level in 40 years. It is expected that by 2025, gold prices may reach $3,600 per ounce, primarily driven by market investment demand for gold and concerns about economic growth. The report emphasizes that the phenomena in the gold market are different from other commodities, with long-term gold prices being disconnected from marginal costs

- Citigroup's report highlights three unusual conditions in the gold market: high spot prices, elevated U.S. interest rates, and a strong dollar.  
- These factors have led to gold producers achieving their highest profit margins in 40 years, with predictions of gold prices reaching $3,600 per ounce by Q4 2025.  
- The report emphasizes that strong investment demand for gold, driven by concerns over the U.S. stock market and economic growth, will continue to support these price levels.

This is a "once in 40 years" great opportunity in the gold mine