Citigroup's latest commodity outlook: In a bull market scenario, gold price at $6000, copper at $15,000, aluminum aiming for the $4,000 mark.

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In its latest annual commodities outlook report, Citi’s commodities research team focuses on two conflicting points: on one side, precious metals prices have “decoupled” from mining costs and profit margins have soared to rare levels; on the other side, basic metals are still riding short-term tailwinds, but the real mid-term story centers on copper, aluminum, and the narratives of electricity and AI behind them.

According to Chase Trading Desk, Citi analysts Max Layton and team’s core judgment on gold is that its pricing anchor is undergoing a structural shift: gold prices are no longer dominated by marginal mining costs, but jointly determined by global nominal spending on gold and the highly rigid supply capacity. Given limited supply elasticity from mining, recycling and inventory selling, price itself becomes the only clearing mechanism. The small size of the physical gold market means that even a tiny fraction of wealth reallocation can only be balanced by a sharp increase in price. Thus, gold is shifting from a “safe haven” tool to a macro asset reflecting global wealth structure changes.

In Citi’s “bull case scenario,” the price center of gold, copper, and aluminum will rise significantly: gold could see $6,000/oz, copper up to $15,000/ton, and aluminum approaching $4,000/ton.

Gold’s breakaway from cost makes hedging a high-risk move

The report starts with a direct fact: gold prices have hit new highs both nominally and in real terms, and have diverged notably from marginal mining costs, with futures priced significantly above spot. The result: high-cost gold mines’ profit margins have surged to “the highest in half a century”, even three times higher than mining profits during the 1980 “Second Oil Crisis”.

In this profit environment, many companies instinctively want to “lock in profits”. Citi’s warning is sharp: historically, companies and sovereigns ran into trouble with hedging not because of “hedging” itself—but because they sold off the upside, especially “sold too much upside”. This exposes companies or sovereigns to risks during cost inflation or underperformance in production; it may also trigger shareholder conflicts over upside exposure, or lead to cash margin call pressure.

The report spends ample space discussing Mexico’s oil revenue insurance-style hedging: using rolling insurance premiums to reduce income volatility, instead of selling upside in price. Citing academic research, the conclusion is: in the past 20 years, Mexico has not faced any major hedging issues, and gained lower income volatility; IMF and academic studies also report lower sovereign debt costs and welfare benefits.

Citi applies this logic to the corporate side: if insurance/hedging decouples “commodity volatility–earnings volatility”, theoretically default risk and equity loss risk are reduced, which lowers capital costs (beta, WACC), boosting valuation. The cost is plain: insurance is not free. The report says part of the premium can be offset by selling limited call spreads—the key is “limited”, to avoid selling unlimited upside.

Citi does not call insurance the holy grail. The report clearly states: the impact of hedging/insurance on cash flows can be uncertain both short and long-term. Mexico’s project reduces long-term volatility and “ultimately had no cost”, but the same logic does not hold for gold—because in the past 25 years gold rose from about $300/oz to about $4,000/oz, locking in for the long term would be expensive. Even Mexico’s own mode saw periodic switching of cash flows: years of high oil prices followed by drops (like 2009/2015/2020) saw positive cash flow, while intermediate periods could be negative.

Under gold’s new pricing mechanism, household wealth transfer could drive gold to $6,000?

Citi stresses that gold’s breakaway from “cost” doesn’t mean price distortion. On the contrary, gold’s pricing mechanism is changing.

The report’s breakdown of gold price is simple: Gold price ≈ total global USD spent on gold ÷ gold supply (mined supply + inventory selling). In late January, annualized by spot prices and projected at constant 2025 prices, the global “gold spending” is about $1 trillion.

Citi uses scenario tables to clarify “the same price can be explained by different combinations”: with different total gold spending and different inventory selling rates, the same price level can be derived; if inventory holders stop selling, under the assumption of equal gold spending, derived gold prices jump up sharply (Citi gives levels from about $4,677/oz to about $5,847/oz).

Supporting the “buy on dips” risk checklist, the report lists a wide range of but very specific factors: sovereign debt and high interest cost driven “currency devaluation/vulnerability” worries (esp. U.S.), geopolitical risk (Russia, Iran, Venezuela and NATO, Russia-Ukraine etc.), worries about long-term impact of AI, lack of investment channels and high savings in China, and new gold-buying platforms opening up incremental markets (Costco, stablecoins, crypto-related products).

The most radical and impactful page of the report uses supply elasticity to dismiss the idea of “wealth migration being smoothed”: current gold supply value is only about 0.1% of global household wealth. This means just 0.1% (one thousandth) incremental shift from household wealth to gold would, in theory, require “mined gold supply to double” to meet demand.

Further inference: if global household gold allocation rises from the long-term mean of 3.5% to 5% (up 1.5 percentage points), that demand equals 18 years of mine supply, nearly half the historic accumulated stock of jewelry, bars, and coins. Citi says directly: such a wealth transfer cannot be met by output, only by price—at this 1.5 percentage point migration, gold price needs to reach about $6,000/oz, roughly matching its bull scenario.

Yet the report also notes an easily ignored boundary condition: at current prices, private sector bars, coins, and jewelry is about $20 trillion, already around 6% of global household financial wealth.

It is worth noting that Citi’s report is not one-sidedly bullish on gold. On the contrary, the research team repeatedly emphasizes current gold prices are already in a “historically extreme range”, and future moves will be more dependent on marginal shifts in capital flows and risk variables.

Citi gives a “sustainability stress test” metric: at $5,100/oz, global gold spending is about 0.73% of GDP, about 2.9% of global total savings—one of the highest levels in 55 years of data. For households’ jewelry and investment demand, net spending is about 5–6% of household savings (the report assumes household savings are about $9–10 trillion); gross spending is even up to 10–11%. Citi’s conclusion is direct: this is high, long-term likely unsustainable.

Base metals: Mid-term bet is more on aluminum, with a peak at $4,000

For base metals, notably, robots may be an underestimated metal demand variable. Citi points out that whether humanoid or non-humanoid, robots are in essence highly dependent on electricity, lithium, copper, and aluminum—“metal-intensive terminals”.

Citi cites calculations that, if the robotics industry accelerates expansion over the next decade, demand for electricity and metals could reach several times current global supply. At the same time, the report notes China’s output in service robots is clearly accelerating, and this trend in the mid-to-long term could cause nonlinear impacts on metal demand.

Strategically, Citi admits metals (and many hard assets) have short-term upside momentum, but compared to early December, the team is less confident about “further-out contracts being supported by spot logic”.

Aluminum is seen by Citi as a structurally stronger long bet. Restricted by China’s cap on electrolytic aluminum capacity, power constraints, and competition for power from data centers/power infrastructure, Citi asserts that aluminum’s supply elasticity is long-term limited, while demand continues to benefit from energy system restructuring.

On target price, Citi gives a 2026 baseline average $3,650/ton, bull case $4,000/ton, bear case $2,800/ton. The core logic: structurally bullish mid-term, supply constrained by China’s cap and electricity limitations (data center power competition), demand benefits from energy transition and robot industry growth; baseline supply-demand roughly balanced, bear case demand weakness causes price drop.

Copper: AI data center 2-year increment, bull scenario may test $15,000

Citi’s framework for copper is clear:

If AI data center construction continues to accelerate, it could add about 150,000 tons/year copper demand in both 2026/2027; but data centers currently only account for 1.5% of global copper consumption, projected to reach 2.4% by 2027, so this trend will marginally fade after 2027.On price, Citi’s baseline for 2026 is a full-year average of around $13,000/ton, believing this level can achieve “fragile but sustainable balance” amid limited supply, increased recycling and expanding demand. In a more optimistic scenario, factors like US soft landing, dollar weakening, inventory build for resource security, shortage of mine/scrap supply, and US copper tariff implementation could give copper price upside to $15,000/ton.On supply and demand, Citi describes the 2026 market as “near balanced but slightly short”: refined copper deficit of 56,000 tons.

The real variable, Citi highlights, is scrap copper: its “Call on Scrap” model finds that at $1,000/ton, scrap copper supply rises by about 150,000–200,000 tons/year. But Citi notes an uncertainty: high prices in April/May 2024 triggered a significant scrap inventory sell-off, and it’s unclear if the current rally will produce a similar “release”—which is one path to a bull case scenario.

The report singles out “U.S. tariffs and inventory”: the team expects U.S. net imports to fall below normal over coming months, driving down stockpiles accumulated in 2025; longer-term, there’s still “potential 15% (2027) and 30% (2028)” tariff risk embedded in spreads, but the baseline is either no tariff or phased S232 implementation with zero tariffs for key partners.

Other metals: Nickel looks like sentiment repair, zinc is surplus logic, tin for supply shocks

• Nickel: The report attributes the recent rebound mostly to “short covering”, suggesting the market is less confident on further downside, but not fully agreed on sustainable upside; baseline for 2026 average is about $17,000/ton.
• Zinc: Citi expects the refined zinc market to move into “widening surplus” in 2026–2027; prices may follow sector’s short-term gains, but supply growth will outpace demand.
• Tin: In a bull scenario, “scarcity pricing” could send prices to $55,000/ton, then back to a more sustainable $45,000/ton by end 2026, while noting CTAs’ net long is now high, Myanmar (Wa State) supply may gradually return by 2026, convenience yields have been low for months, meaning current stocks aren’t tight.

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The above content is courtesy of Chase Trading Desk.

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