The worst is over for gold? Barclays urges "buy the dip," Citi raises target price

After a deep pullback lasting 2.5 months and ranging from 20% to 25%, gold now stands at a critical turning point. On June 15th, both Barclays and Citi made statements on the same day: the former clearly declared “it’s time to increase gold exposure,” while the latter raised its 3-month gold price target from $4,000/oz to $4,500/oz. Both institutions share the same judgment: This round of adjustment is more like a price reset, not the end of the bull market. The core catalyst triggering these optimistic forecasts is the official announcement by the US and Iran that they will sign a memorandum of understanding (MoU) this Friday. According to Citi Research, this event is expected to restore trade flow through the Strait of Hormuz to near normal by mid-to-late July, allowing the oil market to refocus on weak supply and demand fundamentals—Citi lowered its Brent crude oil forecasts for Q3 2026 and 2027 to $75, $70, and $65 per barrel (previously predicted at $110, $90, and $80 per barrel). Citi believes that as geopolitical tensions ease, inflationary pressures will likely decrease, and the key macro headwinds that previously dragged down gold prices may gradually abate. Citi maintains its bullish forecast of $5,000/oz for 6 to 12 months, but cautions that gold prices still face significant volatility risks. Barclays, meanwhile, comprehensively reviewed this round of declines from the perspectives of exchange rates, equities strategies, and derivatives. The bank believes that a 2.5% strengthening of the US dollar and a more than 10% rise in the S&P 500 created a double pressure, coupled with concentrated unwinding of crowded long positions, together causing this rapid correction. But medium-term support remains intact: persistently high inflation, ongoing policy uncertainty, and the strategic need for reserve diversification by central banks will reassert themselves in gold price trends once geopolitical pressure stabilizes. According to Barclays, every 1 percentage point rise in US CPI lifts gold prices by about 5%. This inflation transmission mechanism will be the core driving force of the current rebound. US-Iran Memorandum of Understanding: Key Catalyst Arrives, Oil Price Expectations Completely Reversed According to Citi Research, breakthroughs in US-Iran negotiations are considered one of the most important commodity market events this year. Citi notes that while the market has digested the signing itself, it has not fully priced in the scenario of sustained recovery in the Strait of Hormuz trade flow over the medium term—otherwise, current oil prices should be about $10–$15/barrel lower than their current level, indicating further downside potential for oil prices. Citi’s base scenario (60% probability): After the MoU is officially signed, negotiations continue to progress, leading to about 4 million barrels/day of apparent supply surplus by 2027, at which point oil prices will most likely fall below $70/barrel. Citi also sets two tail scenarios: The bull market scenario (20% probability) is a short-lived easing followed by renewed conflict; the bear market scenario (20% probability) is rapid production ramp-up by UAE, Saudi Arabia, and Iran, combined with a Russia-Ukraine ceasefire. The spillover effect of falling oil prices directly benefits precious metals. Citi believes that the energy inflation impact from Middle East conflicts was a key reason gold prices were under pressure—high oil prices pushed up inflation expectations, forcing central banks to maintain a hawkish stance and suppress real interest rate declines. As oil price pressure eases, this chain reaction may gradually reverse, opening an upward channel for gold prices. Barclays: This Adjustment is a “Reset,” Not the End According to Barclays Research, since January 2024, gold’s cumulative gain has exceeded 100%. After surging to around $5,500/oz in January, it underwent a roughly 25% pullback, bringing prices back to November 2025 levels. Barclays points out that, given the previous technical overextension and significant overvaluation in-relative macro factors (especially real rates), this correction is not surprising. From a valuation perspective, the Barclays team notes that gold prices have returned to the bank’s fair value model estimate of around $4,150/oz. This model considers US CPI, the S&P 500, the US dollar index, and central bank gold buying demand as the four core drivers of gold prices. This year, the combined strength of the dollar and equity markets exerted negative pressure on gold; meanwhile, some emerging market central banks sold gold reserves during the Middle East conflict to stabilize their currencies, adding extra selling pressure and further depressing gold prices. In the options market, according to Barclays’ derivatives strategy team, market positions and options pricing indicators have returned to significantly more normal levels compared to the extreme levels at the start of the year. Notably, implied volatility on bullish options has reversed from deep premiums at the start of the year to near its lowest level in a decade, while bearish option skew has climbed to its highest level in nearly ten years, driven by renewed hedging demand. This structural shift means the cost-effectiveness of capturing asymmetric upside returns through options has improved greatly, and the overall clearing of market sentiment lays a healthier technical foundation for a new upward leg. Long-Tailed Inflation Effect: Gold’s Strongest Structural Support Barclays regards US inflation as the dominant variable for gold’s medium- to long-term movement. Its model estimates that every 1 percentage point increase in US CPI lifts gold prices about 5%, meaning that the cumulative inflationary impact from a Middle East energy shock will be embedded in the upward trajectory of gold even after oil prices eventually fall. From a more macro-structural viewpoint, Barclays believes multiple long-term positives remain intact. First, the de-dollarization trend continues to erode demand for dollar reserves. Second, developed market central banks tend to tolerate inflation slightly above target, persistently eroding fiat purchasing power. Third, the expansion of fiscal deficits and currency depreciation expectations brought by tariffs policy grant gold extra premium support beyond historical correlations. Central bank gold buying data likewise shows that structural demand remains robust. According to the latest World Gold Council (WGC) data, central bank gold purchases (measured in ounces) in Q1 2026 increased 17% quarter-on-quarter; measured in dollars, the increase was 38% due to high gold prices. The main buyers in Q1 were the central banks of Poland and Uzbekistan, and the world’s largest stablecoin issuer, Tether, also increased its holdings, purchasing 12.6 tons in the quarter and raising total reserves to 154 tons, ranking fourth globally, surpassing most major central banks. Turkey and Russia, meanwhile, saw large-scale net selling due to currency stabilization needs. Barclays believes that as geopolitical tensions stabilize, emerging market central banks that previously sold gold reserves may resume buying. ~~~~~~~~~~~~~~~~~~~~~~~~ The above content is from [Chasing Wind Trading Desk](https://mp.weixin.qq.com/s/uua05g5qk-N2J7h91pyqxQ). For more detailed analysis, including real-time commentary and frontline research, please join [Chasing Wind Trading Desk ▪ Annual Membership](https://wallstreetcn.com/shop/item/1000309) [Risk Warning and Disclaimer] The market contains risks; investment requires caution. This article does not constitute personal investment advice and does not take into account the individual investment objectives, financial situations, or needs of specific users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular situation. Investments made accordingly are at your own risk.