Citi lowers gold price forecasts for 2015, 2016

An employee poses for photographs with a one kilogram gold bar at the Korea Gold Exchange in Seoul, South Korea, July 31, 2015. REUTERS/Kim Hong-Ji

(Reuters) - Citi on Tuesday lowered its average gold price forecasts for this year and next, citing weak economic conditions and fundamentals.

The bank lowered its 2015 average gold price forecast to $1,140 from $1,180 per ounce and 2016 to $1,050 from $1,195.

Citi said it expects continued dollar strength as the U.S. Federal Reserve begins tightening financial stimulus measures over the next several quarters.

Funds and institutional investors have piled into bullion over the past decade, looking for protection against inflation and betting on a weaker dollar as the U.S. Fed pumped money into the system as part of its stimulus efforts.

As that program comes to an end, gold’s appeal has waned.

“If this (dollar) appreciation manifests, then we are likely to be in for more pain in gold markets even after the first hike takes place.”

Citi also reduced its 2015 third and fourth quarter forecasts to $1,090 per ounce and $1,050 per ounce, respectively.

Spot gold was trading at around $1,119 per ounce as of 0850 GMT (0450 EDT) on Tuesday. [GOL/]

Reporting by Kevin Jose and Nallur Sethuraman in Bengaluru; editing by Jason Neely