In light of increasing geopolitical uncertainty, French Bank Société Générale advises investors to maintain a core position in gold. In its third-quarter Multi-Asset Portfolio Strategy published on Wednesday, the bank revealed it is keeping a 5% holding in gold despite reducing its overall commodity exposure.
Société Générale has cut its broader commodity basket from 9% to 7%, reflecting concerns about oil prices. Analysts at the bank are bearish on oil, predicting that OPEC+ nations, particularly Saudi Arabia, will struggle to maintain production cuts. They foresee a scenario similar to the end of 1985 or 2014, where Saudi Arabia might aim to regain lost market share, leading to a bearish outlook on oil.
Conversely, the bank has chosen to keep its gold holdings steady in the lead-up to the U.S. elections in November. The analysts highlighted the impact of the decision to freeze Russian central bank USD assets, which is likely to drive sustained gold purchases by central banks in the global south as they seek to protect their reserves.
Société Générale does not anticipate a correction in gold’s uptrend, even as prices consolidate below $2,350 an ounce. The bank noted that gold has been a top-performing asset in the first part of the year, driven by factors such as inflation stickiness, widening public deficits, geopolitics, and diversification by central banks.
As part of its strategic adjustments, Société Générale has reduced its cash holdings from 14% to 10% and increased its exposure to corporate bonds and private credit, the latter rising from 15% to 21%. Despite these changes, the bank maintains its overall investment stance, emphasizing a balanced allocation that has favored assets like Japan and US equities, and gold.
The bank does not expect a significant portfolio shift until the Federal Reserve begins cutting interest rates. Given the U.S. economy’s resilience, analysts believe that rate cuts may not commence until 2025.
