Investing.com — In a note to clients Thursday, Citi analysts advised a cautious approach in and after Donald Trump's election victory and a Republican “red wave” in Congress.
Recent changes in global markets, with oil, gold, gold and emerging market stocks falling 1-5%, reflect concerns over potential trade tensions with China over tariffs and reduction in global demand, according to the bank.
When it comes to oil, Citi advises investors to sell any near-term strength that may result from geopolitical risks in the Middle East.
The bank views the long-term outlook for oil as bearish, expecting it to average $60 per barrel in 2025 – a forecast unchanged since the start of 2024.
Citi explains that Trump's emphasis on reducing energy costs, easing regulations and increasing domestic oil supply could contribute to this pressure on oil prices.
Additionally, Citi notes that potential sanctions against Iran could have limited impact, as Trump's policies are not expected to significantly reduce Iran's oil exports.
As Citi puts it, the new administration's policies are “likely to be marginally net bearish for oil.”
In contrast, Citi recommends a buy-the-dip approach for gold. Although gold has seen short-term weakness due to a rally in US stocks and auto sales, the bank expects gold prices to rise over the next six months.
Citi maintains its bullish stance, targeting $3,000 per ounce, thanks to factors including the softening U.S. labor market, high interest rates and global dedollarization.
However, she warns that the price of gold will likely be weak in the very short term.
Still, Citi sees opportunity in “buying dips below $2,700 an ounce,” particularly because structural factors support a long-term bull market.
The outlook for other commodities remains mixed. Base metals are considered “broadly neutral” due to uncertainty over the scale and timing of tariffs imposed on China.
Separately, increased trade tensions are seen as a threat to U.S. crop prices, particularly soybeans and , which could lead to more favorable terms for Brazil.
