Citi Sees Gold Soaring as Strait of Hormuz Reopens

Citi has made a bold call in its latest commodities outlook, predicting that the Strait of Hormuz will reopen in Q4 2026 and trigger a significant leg higher for gold. The bank's base-case scenario assigns a probability of 65-75% to this event, which would lead to a supply surplus in the global oil market and exert downward pressure on oil prices.

Citi believes that once shipping normalizes, oil prices will decline, benefiting gold through multiple channels. Lower energy costs will ease inflationary pressures, allowing the Federal Reserve to pivot toward accommodative monetary policy, while a weaker dollar and lower real interest rates will directly reduce the opportunity cost of holding non-yielding gold.

The bank raised its 0-3 month gold price target to $4,800 per ounce, significantly above the current spot level of roughly $4,500 per ounce. Citi also notes that even in a low-probability scenario of a prolonged Strait of Hormuz closure, gold possesses strong downside resilience and risks are skewed to the upside overall.