Société Générale commodity analysts predict gold prices will face limited medium-term upside despite declining real yields and a weaker dollar, as strong equity markets continue to attract investors to risk assets. The French banking giant attributes this outlook to persistent inflation, oil-driven price shocks, and a higher-for-longer interest rate regime. The analysts emphasize that monetary policy remains the key variable for gold through its impact on real rates and the opportunity cost of holding non-yielding assets.
SocGen cautioned that gold investors may experience an extended period of muted ETF flows combined with a pause in central bank purchases. "The market is finely balanced, and the path of monetary policy remains the key variable for gold through its impact on real rates and the opportunity cost of holding a non-yielding asset," the analysts wrote in their report. "Our analyst's central scenario is driven by persistent inflation, oil-driven price shocks and a clear 'higher for-longer' rates regime."
SocGen Analysts Outline Central Bank Monetary Policy Stance
SocGen analysts expect the world's major central banks will remain cautious in their policy approach. The report states "the Fed on hold, the ECB still leaning hawkish, and the BoJ gradually tightening." This cautious stance across major economies forms a core component of the analysts' baseline scenario for gold price constraints.
Two Macroeconomic Scenarios Shape Gold Outlook
The analysts identify two potential macroeconomic paths that could influence gold prices. The first scenario involves "an AI-led, inflationary growth cycle keeping policy tight," while the second encompasses "an energy-driven stagflation shock, particularly in the event of prolonged supply disruptions."
Regarding inflation trajectories, the analysts expect inflation across the US and Europe to stay elevated into early 2027 before moderating. They note this timeline will provide "only temporary support to gold's hedge appeal." The report emphasizes that "policy stability rather than easing as the baseline" will limit upside for gold in the near term.
SocGen does anticipate some support to emerge later "as real yields gradually decline and the USD initially softens," but warns that even under these conditions, gold's upside will be constrained by "resilient global growth, strong equity markets and a continued investor preference for risk assets."
Demand-Side Dynamics Show Mixed Signals for Gold
On the demand side, the analysts highlight that subdued ETF inflows and constrained central bank activity will limit the strength of financial demand. However, they anticipate a recovery into 2027. Physical demand, particularly in the jewellery sector, shows resilience in value terms according to the report. The analysts suggest this physical demand "could provide marginal support as prices consolidate."
FAQ
Why does SocGen expect limited gold price upside despite declining real yields?
SocGen analysts attribute the limited upside to strong equity markets that continue to draw investors toward risk assets, even as real yields decline and the dollar weakens. The analysts emphasize that resilient global growth and investor preference for equities will constrain gold's appeal as an alternative investment.
What inflation timeline does SocGen project for the US and Europe?
SocGen analysts expect inflation across the US and Europe to stay elevated into early 2027 before moderating. They characterize this as providing only temporary support to gold's hedge appeal, with policy stability rather than easing serving as the baseline scenario that limits near-term gold upside.
