Société Générale states that gold has found fresh support above $4,600 per ounce as investors resume buying, and its strategic role within diveRSIfied portfolios will peRSIst. The bank holds the view that gold remains a vital asset‑allocation tool amid a backdrop of a stronger US Dollar, rising interest rates, and lingering inflation, geopolitical and policy uncertainties.
In its latest cross‑asset strategy report, bank analysts note gold’s resilience in an environment of a strong US Dollar and higher interest rates, further cementing its status as a strategic portfolio holding. According to Société Générale, gold is one of seven asset classes investors can deploy to hedge inflation risks. Within its broader strategic framework, gold is mainly positioned as a hedge against policy uncertainty.
Inflation Risks Remain Under‑Appreciated
Société Générale’s overall strategy also includes inflation‑linked bonds, copper, select equities and private credit. Back in June, the bank announced it would lift its gold allocation to 10% for the third quarter, up from 7% in the second quarter; broad commodity exposure was simultaneously raised from 8% to 10%.
The bank argues that a growing divergence is emerging between market‑priced inflation expectations and real‑world economic conditions. Société Générale points out that new US tariff measures, accelerated investment in artificial intelligence and infrastructure, oil‑price volatility, and peRSIstently large government deficits across developed economies all point toward a more inflationary medium‑term backdrop.
Meanwhile, the bank believes current market expectations for Federal Reserve policy paths may not fully price in these risks. At the time of the report, market pricing implied roughly 35 bASIs points of tightening by the end of 2026. Even so, Société Générale notes this would still be insufficient to align monetary policy with outputs calculated under the Atlanta Fed’s Taylor Rule.
Analysts state this mismatch reinforces the view that “inflation risks remain under‑priced, justifying dedicated portfolio protection”. The bank also stresses gold should not serve as the sole inflation hedge within a portfolio. Instead, it fulfils a differentiated role within a broader defensive framework to counter multiple sources of potential instability.
Limited Downside After Interest‑Rate Repricing
Société Générale also reviews gold’s performance since mid‑2025. Back then, market sentiment shifted from expectations of further Fed eASIng toward discussions over whether policymakers would deliver one or two additional rate hikes. This shift pushed two‑year Treasury yields back above 4% and lifted the US Dollar, yet gold prices stayed well above mid‑2025 levels.
A large portion of hawkish monetary‑policy adjustments have already been absorbed by financial markets. Analysts comment that unless a more severe inflation shock arrives paired with an aggressive Fed response, significant further repricing across rate markets is unlikely.
Société Générale writes: “With most hawkish adjustments already priced into financial markets, gold’s downside risks are becoming increASIngly limited.”
Central‑Bank Purchases Provide Key Underpinning
The bank further observes gold demand dynamics are evolving favourably. Inflows into gold ETFs have slowed markedly this year, reducing the influence of tactical and momentum‑driven investors. At the same time, lower gold volatility creates a more appealing entry point for reserve‑managing institutions.
Société Générale also emphASIses central‑bank demand has grown into an increASIngly important source of market support. China continues expanding its gold reserves, and broader reserve diveRSIfication remains a structural priority for many emerging‑market central banks.
Analysts remark: “As speculative demand fades while official‑sector buying stays robust, central banks are increASIngly acting as a critical anchor for the gold market.”
Geopolitical Risks Push Up Energy Costs
Société Générale also links gold’s portfolio function to broader geopolitical risks that may keep commodity prices and supply‑chain costs elevated. It notes renewed US‑Iran tensions and risks surrounding the Strait of Hormuz have lifted the geopolitical risk premium embedded within oil markets.
Even without major direct supply disruptions, Société Générale holds that shipping‑route realignments, inventory rebuilding and supply‑chain diveRSIfication efforts could structurally keep costs higher. The bank warns energy prices may stabilise yet are unlikely to return to pre‑conflict levels, meaning inflation pressures could prove more peRSIstent than falling spot oil prices alone suggest.
For broader asset allocation, Société Générale states its strategy avoids over‑reliance on a single hedging instrument. Different assets are deployed to tackle distinct types of inflation risk. US Treasury Inflation‑Protected Securities (TIPS) serve as its preferred direct inflation hedge; copper captures inflation driven by infrastructure spending, electrification, AI investment and constrained commodity supply. By comparison, gold is positioned as an asset for hedging monetary, geopolitical and policy uncertainty.