Wall Street major Citibank, which maintained a bearish stance on gold throughout this year despite gold prices hitting record highs and remaining near historic peaks, has shifted to a short-term bullish position following the release of an exceptionally weak U.S. non-farm employment report. In their latest research note released Monday, the institution dramatically raised their three-month gold price forecast from $3,300 per ounce to $3,500, while adjusting their expected trading range from the long-held $3,100-$3,500 to $3,300-$3,600. The firm emphasized that the core reasoning stems from significantly deteriorating U.S. economic growth outlook and inflation prospects.

Following July's non-farm data that fell far short of market expectations, coupled with prior months' data being revised down by as much as 90%, Wall Street sentiment has turned pessimistic regarding U.S. economic growth momentum while expectations for Federal Reserve rate cuts have surged dramatically. These two factors could serve as long-term bullish catalysts for gold fundamentals for an extended period.

The employment report revealed only 73,000 jobs added in July while unexpectedly revising down May and June employment figures by a combined 258,000 positions, representing an unprecedented 90% downward revision. This data substantially drove traders to heavily bet on Fed rate cuts, with interest rate futures markets showing an 84% probability of Fed rate cuts next month - up from less than 40% before the non-farm release. Traders are betting on at least two rate cuts by year-end, with many pricing in consecutive 25 basis point cuts in September and October, plus a December cut totaling 75 basis points by year-end.

More aggressive traders are even betting on a repeat of the 2024 playbook - a 50 basis point September cut followed by consecutive 75 basis point cuts in October and December. "We must remember last summer's situation - the Fed held rates steady in July but subsequently received weak labor market data and cut rates by 50 basis points in September 2024," Citigroup analysts noted.

The "bad news is good news" theory has long been a catalyst driving U.S. stock valuations higher - where economic weakness implies more aggressive Fed easing, benefiting risk assets like equities. However, with weak non-farm data hammering risk assets, this theory has essentially "collapsed" recently. Weak U.S. bonds this year and gold, which has been consolidating lower after hitting new highs, may experience strong rallies.

**Wall Street's Famous "Gold Bear" Suddenly Turns Bullish**

Citi, long known on Wall Street as a prominent "gold bear," has shifted to short-term bullish on gold - primarily due to global economic growth and trade uncertainties stemming from tariff policies, and Trump's global tariff threats stoking inflation expectations while pushing U.S. consumer confidence, spending, and labor markets into synchronized decline. This could drive U.S. economic weakness and sustained expectations for Fed rate cuts, with these factors dominating investment focus representing a significant signal of changing gold trading logic.

"In the second half of 2025, weaker U.S. economic growth trends and tariff-related inflation concerns are expected to continue rising, combined with dollar weakness, gold prices will rise moderately and potentially reach new record highs again," Citigroup stated in their research.

Last week, U.S. President Donald Trump announced high tariffs on exports from dozens of trading partners including Canada, Brazil, India, and Switzerland. U.S. Trade Representative Jamieson Greer indicated on Sunday's CBS "Face the Nation" that recently announced tariffs on multiple countries would likely remain rather than be reduced during negotiations.

Meanwhile, the dollar weakened last week after U.S. July non-farm payrolls added only 73,000 jobs, with June data revised down to just 14,000 additions. This reignited market hopes for September Fed rate cuts, with some rate futures traders even pricing in a 50 basis point September cut.

Citi's analytical team also noted that beyond July's labor market weakness, U.S. labor market data showed significant weakening trends extending back to Q2 2025. Trump's direct firing of the Bureau of Labor Statistics chief and attempts to interfere with Fed FOMC monetary policy have raised market concerns about institutional independence and data credibility of both the Fed and U.S. statistics, while geopolitical risks from the Russia-Ukraine conflict remain elevated.

Citi's team emphasized that gold has historically been viewed as the core safe-haven asset during periods of political and economic growth uncertainty, performing particularly well in rate environments where Fed easing expectations surge dramatically. Citi data shows global gold demand has grown over one-third since mid-2022, with gold prices nearly doubling by Q2 2025. Maintaining the same demand pace makes continued record highs highly probable.

The institution added that strong gold demand performance benefits from robust investment demand amid economic weakness, moderate central bank purchases, and stable Asian jewelry demand despite higher prices.

**$3,500 Not the Top - Could Gold Reach $4,000?**

Monday saw spot gold prices decline slightly to around $3,350 per ounce, mainly due to some retail investors taking profits after Friday's strongest two-month gain, driven by strong safe-haven demand from weak non-farm data and rising rate cut expectations.

Another factor was Trump's announcement last week of new tariffs ranging from 10% to 41% on imports from dozens of countries, effective August 7, again sparking global trade tensions.

July's employment growth falling far short of expectations with significant prior months' revisions has intensified concerns about the U.S. economy, with expanding possibilities of major labor market cracks putting September Fed rate cuts back on the agenda.

As mentioned, economic and international trade uncertainties from tariff policies, combined with weak U.S. economic growth and Fed easing expectations, are reshaping gold trading logic and could drive sustained gold strength at least until the Fed's potential next easing cycle through mid-2026.

Goldman Sachs views long gold as the most certain trade for the second half of this year through the first half of next year, projecting spot gold to reach $3,700 by end-2025 and $4,000 by mid-2026.

Another Wall Street major, JPMorgan Chase, stated that deteriorating U.S. non-farm employment data would be gold's strongest bullish catalyst. In an optimistic scenario, JPMorgan expects gold prices to advance toward their year-end target of $3,675/ounce, potentially reaching $4,000/ounce as early as next year.

JPMorgan emphasized that continued weak private employment growth data would be sufficient to change market sentiment and confirm September rate cuts. In this scenario, declining Treasury yields could gain stronger momentum, accelerating fund rotation into gold ETFs and futures markets.

JPMorgan highlighted that more substantial deterioration in U.S. labor data prompting Fed rate cuts would drive the largest bullish response in gold ETF demand and prices, consolidating a strong gold bull market surge toward the $4,000/ounce breakthrough.