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What is the story about?
A likely improvement in geopolitical conditions and rising oil supply could keep crude prices under pressure over the next six to 12 months, according to Citi's Global Head of Commodities, Max Layton.
At the same time, the bank believes investors should wait before returning to gold and silver, as both precious metals could face further weakness in the near term before recovering later this year.
Layton said easing tensions in West Asia have significantly changed the outlook for oil markets. He expects a potential agreement involving Iran to increase supply, while softer demand from China and additional production from other regions could leave the market with excess crude.
He believes the global oil market could move into a sizeable surplus if current negotiations lead to a lasting agreement, creating further downside pressure on prices. Citi expects Brent crude to trade in the $60-$65 per barrel range by the end of the year.
"We are suggesting that people sell any rallies," Layton said, adding that oil prices are likely to remain volatile but trend lower over the coming months.
On precious metals, Layton said the extraordinary rally in gold over the past 18 to 24 months was largely driven by strong investor demand, but that momentum has now weakened. Although demand remains above historical levels, it has slowed enough to keep prices under pressure in the short term.
He expects gold to remain vulnerable over the next few weeks as higher real interest rates and a stronger US dollar continue to weigh on investor sentiment. Citi believes the metal could fall further before becoming attractive again later in the year.
"You want to buy the dip over the next two months," Layton said, adding that the fourth quarter could offer a better opportunity as expectations of lower real interest rates and easing inflation support prices.
Layton also expects silver to follow gold's direction, noting that recent gains were driven more by investor flows than by industrial demand. While structural demand from sectors such as solar remains supportive, he believes high prices are encouraging substitution and limiting further upside in the near term.
For full interview, watch accompanying video
At the same time, the bank believes investors should wait before returning to gold and silver, as both precious metals could face further weakness in the near term before recovering later this year.
Layton said easing tensions in West Asia have significantly changed the outlook for oil markets. He expects a potential agreement involving Iran to increase supply, while softer demand from China and additional production from other regions could leave the market with excess crude.
He believes the global oil market could move into a sizeable surplus if current negotiations lead to a lasting agreement, creating further downside pressure on prices. Citi expects Brent crude to trade in the $60-$65 per barrel range by the end of the year.
"We are suggesting that people sell any rallies," Layton said, adding that oil prices are likely to remain volatile but trend lower over the coming months.
On precious metals, Layton said the extraordinary rally in gold over the past 18 to 24 months was largely driven by strong investor demand, but that momentum has now weakened. Although demand remains above historical levels, it has slowed enough to keep prices under pressure in the short term.
He expects gold to remain vulnerable over the next few weeks as higher real interest rates and a stronger US dollar continue to weigh on investor sentiment. Citi believes the metal could fall further before becoming attractive again later in the year.
"You want to buy the dip over the next two months," Layton said, adding that the fourth quarter could offer a better opportunity as expectations of lower real interest rates and easing inflation support prices.
Layton also expects silver to follow gold's direction, noting that recent gains were driven more by investor flows than by industrial demand. While structural demand from sectors such as solar remains supportive, he believes high prices are encouraging substitution and limiting further upside in the near term.
For full interview, watch accompanying video
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