Societe Generale analysts have identified gold as the standout asset in the commodity sector, elevating it to 100% of their commodity allocation amid a backdrop of geopolitical tension and moderating U.S. inflation. In their latest commodities outlook, the French bank emphasized gold’s robust performance and provided a bullish forecast for the metal.
The analysts at Societe Generale attribute gold’s strength to several key factors: geopolitical uncertainties, the evolving U.S. monetary policy, ongoing central bank purchases, and changing investor flows. However, they also note that while these elements are generally positive for gold, the market lacks new, unpriced drivers that could push prices even higher.
“Gold’s rise has been bolstered by a combination of factors, including geopolitical tensions and expectations of fiscal policy shifts regardless of the U.S. presidential election outcome,” the analysts stated. “Yet, despite this supportive backdrop, there are no immediate new catalysts that could drive prices significantly higher.”
In their Q4 2024 Global Asset Allocation Outlook, Societe Generale revealed that gold now represents the entirety of their commodity holdings and 7% of their total asset allocation, marking a substantial 40% increase from the previous quarter. This decision underscores their confidence in gold’s prospects amidst a year of modest returns across other asset classes.
The report highlights that apart from developed market equities, which have shown single-digit returns, Societe Generale’s Multi Asset Portfolio (SGMAP) has performed well, benefiting from its focus on U.S. equities, corporate credit, and gold. This strategy has helped the portfolio weather periods of market volatility.
The analysts also discussed the broader commodity landscape, expressing bearish views on oil and base metals due to disappointing demand. They have revised their price forecasts downward for base metals and reduced their exposure to cyclical commodities. Conversely, gold remains a bright spot, with increased allocations driven by persistent central bank demand, particularly from non-Western nations.
Societe Generale’s outlook anticipates that gold will continue to benefit from a synchronous global monetary easing cycle and central bank purchases. They foresee spot gold averaging $2,700 per ounce in Q4 2024, rising to $2,725 in early 2025, and reaching $2,750 per ounce by Q2 2025. For the full year of 2025, they project an average price of $2,800 per ounce.
The bank attributes gold’s favorable position to two main factors: concerns over the sustainability of the U.S.-centric financial system and increasing apprehension about global sanctions. The rise in multi-polarization and public debt worldwide supports long-term central bank gold purchases, suggesting a steady increase in inflation-adjusted gold prices.
“Gold is our preferred asset within the commodity sector,” the report concluded. “The metal’s appeal is further strengthened by the current economic climate and limited attractive investment alternatives, particularly in the wake of China’s economic slump, which provides an additional tailwind for gold while other commodities falter.”
