Gold Takes the Lead as SocGen Bets on $2,800/oz by 2025
Gold stands alone in the entire commodity sector, according to analysts at Societe Generale, and the yellow metal now represents 100% of their commodity allocation.
“Buoyed by geopolitical uncertainty and a moderating inflation environment in the US, as well as a potential convergence of fiscal costs whoever wins the US presidential election, gold has continued its march higher since our analysts' last quarterly,” analysts noted in the French bank’s latest commodities outlook. “The question now is where we go from here.”
The SocGen analysts list “five major themes” that they believe are likely to drive gold markets: “geopolitics, the dollar and rates, central bank purchases, investor flows and fundamentals.” But they warn that while each of these drivers is “overwhelmingly positive” for gold prices, “there is a notable absence of unpriced drivers higher.”
“The Fed’s policy reversal, with its likely effect on rates and the dollar, has been widely choreographed, and geopolitical tensions in the Middle East, as well as persisting tensions between the US and China, have also been on the horizon for a while,” they explained. “Fundamentals, geopolitics, rates and the USD as well as continued central bank purchases are all supportive of further gains. However, possible catalysts remain diffuse: ‘Goldi’ without the ‘locks.’”
In their latest Q4 2024 Global Asset Allocation Outlook published on Sept. 12, Societe Generale showed that when it comes to their bullishness on the yellow metal, they’re putting their money where their mouth is: Gold now represents 100% of their commodity holdings and 7% of their total asset allocation, a 40% Q/Q increase .
“Except for developed market equities, most asset classes have delivered single-digit returns in 2024 ytd,” they wrote. “In this context, SGMAP [Societe Generale Multi Asset Portfolio] continues to perform well with robust returns and low volatility. Our focus on US equity, corporate credit and gold has enabled SGMAP to absorb periodic bursts in volatility.”
SocGen analysts said that in a falling commodity price environment, Fed policy is more important than the U.S. election for pricing markets. “We’re particularly worried about oil prices, although they should contribute to disinflation and help central banks to loosen further, which would be a boost for bonds. Finally, yield curve steepeners could deliver in DM and EM, as could flatteners in Japan thanks to BoJ rate hikes.”
They added that the yen carry trade unwind “has much further to go, creating clear market risks as market leverage in this cycle comes mainly from the Japanese currency – not from corporates or households.”
“We further raise yen exposure by 8 points to 20% (and reduce Japanese equities to zero, based mainly on volatility drivers),” they said. “We reduce overall equity exposure by 5 points to 42% and further raise gold by 2 points to 7% – on the back of recurrent demand from central banks in the Global South.”
As for the broader commodities sector, SocGen is bearish on oil and base metals, but remains bullish on gold.
“Disappointing demand for most commodities is a striking feature, leading our commodities experts to revise down price their forecasts for base metals (by mid-2025: copper at $9,500, Brent at $67.5),” they wrote. “We reduce our exposure to cyclical commodities by 2 points to zero. Meanwhile, we raise gold by 2 points to 7%, as geopolitical issues are only likely to boost demand for the asset further in the Global South.”
The analysts say that gold stands out as “the only commodity thriving, with large long exposure on the futures market and ETF inflows,” which suggests strong safe-haven demand for gold even as demand for other commodities weakens. “A synchronous global monetary easing cycle and central banks' gold purchases, mainly from non-Western aligned countries, are fuelling gold's rise,” they wrote. “[W]e attribute this trend to two factors: (1) growing concerns about the sustainability of the US-centric global financial system and (2) increasing apprehension about sanctions. Increasing multi-polarisation and public debt worldwide suggest long-term support for central banks’ gold purchases, indicating a steady inflation-adjusted gold price increase over the long run.”
“Gold is our favourite asset in the commodity complex,” they wrote elsewhere in the outlook report. “Chinese investors drove the March-April gold rally and have become an increasingly prominent force in the gold market due to limited attractive investment alternatives. As long as China is in a slump, gold should experience an additional tailwind while the rest of the commodity complex will continue to suffer.”
Societe Generale now sees spot gold averaging $2,700 per ounce in Q4 2024, before rising to $2,725 in the first quarter of 2025, and $2,750 per ounce by Q2. For the full year of 2025, they estimate spot gold will see an average price of $2,800 per ounce.
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