Gold has recently performed as expected leading up to the U.S. election, but Societe Generale (OTC:SCGLY) analysts suggest the precious metal may take a breather in the near term.
Despite this, they see robust long-term drivers that reinforce the yellow metal's unique role in financial markets.
“Gold is the ultimate ‘unknown unknown’ commodity,” Societe Generale stated, explaining that its primary value lies in its role as a hedge against unforeseen and unpredictable risks.
Unlike most commodities, gold’s market dynamics are not influenced by typical supply and demand fundamentals.
“It is broadly speaking neither seasonal in its supply nor in its demand and is often considered the least commodity-like commodity market,” the firm stated.
According to Societe Generale, gold’s limited industrial use sets it apart from other resources, emphasizing its status as a store of value with a unique monetary role.
“It is this monetary role that makes gold an alternative to fiat currencies and a stable store of value in unstable times,” Societe Generale explained.
The bank highlighted several drivers supporting gold’s current bullish momentum: persistent fiscal profligacy in the U.S., potential reversals in interest rate policy, the weaponization of the U.S. dollar in sanctions enforcement, and escalating geopolitical risks.
They note that investor sentiment has shifted significantly, with money managers, central banks, and ETFs turning bullish on gold simultaneously over the last quarter.
Societe Generale emphasized that “sentiment on gold has converged with few sellers in sight,” solidifying its appeal as a hedge in uncertain times.
While a temporary pause in gold’s rally may be imminent, the firm believes its fundamental strengths and role as a safeguard against “unknown unknowns” ensure its continued relevance in portfolios.
