Citi has warned in its latest commodities report that gold has moved into what it calls an “extreme” valuation zone. The bank said annual global spending on gold has climbed to 0.7% of global GDP, the highest level in 55 years. If that ratio falls back to its historical norm of 0.35% to 0.4%, and other conditions stay unchanged, Citi said gold prices could face a near-halving adjustment to around $2,500 to $3,000 per ounce.
Three valuation gauges are flashing red
Maximilian Layton, Citi’s global head of commodities, said gold could still move higher in the short run, but its medium- to long-term valuation has already reached extreme levels. The first warning sign in the report is the sharp rise in gold spending as a share of GDP, which now stands above levels seen during the 1980 oil crisis. Citi said that points to a clear imbalance in investment demand. It is elevated. It is also fragile.
The second signal comes from mining economics. Citi said profit margins for high-cost gold miners are at their highest level in 50 years, suggesting gold prices have moved well beyond levels supported by marginal production costs. In the bank’s view, margins at such elevated levels often indicate that pricing is no longer anchored by industry fundamentals and is increasingly shaped by speculative activity.
The third signal is gold’s ratio to global broad money supply. Citi said that figure has climbed to 16%, above the peak reached during the first oil crisis in the early 1970s. Even under extreme inflation expectations, the bank argued, that level suggests gold has overreacted relative to monetary conditions.
Near-term upside remains, but the outlook turns cautious after late 2026
Even with those warnings, Citi remains constructive on gold over the next 0 to 3 months. The bank set a short-term target of $5,400 to $5,600 per ounce, citing persistent geopolitical and economic uncertainty and the fact that haven demand has not fully left the market.
Its tone changes over a longer horizon. Citi expects several of the factors supporting current prices to fade after the second half of 2026, which could leave gold more exposed to a pullback as safe-haven demand cools. In the bank’s base case, gold starts declining in late 2026 and falls to $4,000 per ounce in 2027. Its bear-case scenario, assigned roughly a 20% probability, points to $3,000. In an extreme mean-reversion case tied to a normalization in gold spending as a share of GDP, the bank said prices could slide to $2,500.
Gold outlook may matter for crypto investors
The report also has implications for crypto markets. The source material notes that gold and Bitcoin have long been discussed as two major haven assets. If gold enters a structural correction, capital allocation across defensive assets could be reassessed, which may affect the narrative and pricing framework around Bitcoin. Citi did not provide a direct Bitcoin forecast in this report, but its view on gold adds another macro signal for crypto investors tracking shifts in safe-haven flows.