It’s time to get bullish on gold again, says SocGen

In their latest market report, analysts at Société Générale said that after decreasing their gold position in the first half of the year, the precious metal is looking attractive again.

“Gold has recently rebounded towards $4,500/oz following sharp corrections triggered by the US-Israel-Iran conflict and rising Fed rate hike expectations. At the same time, volatility has normalised, speculative positioning has recovered above its two-year average, and the GLD put/call ratio has fallen to a six-month low, signalling a renewal in bullish sentiment,” the analysts said.

Although gold continues to face headwinds from elevated interest rates and a stronger U.S. dollar, Société Générale said much of the Federal Reserve’s hawkish repricing has already been absorbed by financial markets, creating a more favorable risk/reward profile for the precious metal.

The French bank said it remains “strategically bullish” on gold, viewing the precious metal as an important hedge against monetary and policy uncertainty.

“A clear post-2022 regime shift has emerged. Despite persistently positive real yields, gold has continued to trade near record highs, breaking away from historical models that would imply significantly lower prices. Structural factors such as sustained central bank purchases, dedollarisation trends, geopolitical uncertainty and sovereign debt concerns appear to be providing a higher floor for gold prices, limiting the downside impact of elevated real rates,” the analysts said.

Société Générale noted that since the middle of last year, markets have moved from pricing in additional monetary policy easing to debating whether the Federal Reserve will raise interest rates once or twice more. That shift has pushed two-year Treasury yields back above 4% and supported the U.S. dollar.https://www.kitco.com/charts/silver?Symbol=USD

However, despite those traditional headwinds, gold remains well above its mid-2025 levels.

“In our view, it would take a materially larger inflation shock and a much more aggressive Fed response to generate another significant repricing in rates,” the analysts said. “With much of the hawkish adjustment already reflected in financial markets, the downside risk for gold appears increasingly limited.”

Société Générale’s renewed bullish outlook comes as gold attempts to recover from the sharp correction that dominated trading through the spring and early summer. Expectations that the Federal Reserve could be forced to raise interest rates again have remained one of the biggest obstacles for the precious metal.

Those expectations intensified following Federal Reserve Chair Kevin Warsh’s hawkish comments at the central bank’s annual symposium in Jackson Hole last week. Warsh reiterated that policymakers remain focused on bringing inflation sustainably back to the central bank’s 2% target.

However, Société Générale sees limits to how aggressively the Federal Reserve will ultimately be able to tighten monetary policy.

The bank’s economists expect interest rates to remain unchanged through 2027 under their base-case scenario, although they acknowledge that persistent inflation could force policymakers to raise rates once this year. The bank said a September or December hike would be more likely than a move in October.

At the same time, Société Générale sees persistent inflation as another reason investors should maintain strategic exposure to gold.

The bank said a renewed wave of U.S. tariffs, accelerating investment in artificial intelligence and infrastructure, volatile energy prices and persistently large fiscal deficits across developed economies are creating a more inflationary environment than financial markets currently anticipate.

Société Générale noted that markets were pricing in only modest additional Federal Reserve tightening when its report was published. The bank said even those expected rate hikes would not be enough to bring monetary policy in line with the Atlanta Federal Reserve’s Taylor Rule model, suggesting inflation risks remain underpriced.

Along with an improving macro backdrop, the analysts said gold’s underlying demand profile continues to provide important support.

Although inflows into gold-backed exchange-traded funds have moderated sharply this year, they remain positive. At the same time, lower volatility is improving gold’s appeal to longer-term reserve managers rather than short-term momentum traders.

The analysts said this shift could ultimately create a more durable foundation for the precious metal.

China continues to steadily increase its gold reserves, while diversification away from traditional reserve assets remains a structural priority for many emerging-market central banks.

“As speculative demand fades and official-sector buying remains robust, central banks are increasingly becoming the key anchor for the gold market,” the analysts said.

Société Générale said declining volatility itself has historically been an important buy signal for gold, while continued central-bank demand should provide a durable floor underneath prices.

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