Despite gold prices consolidating below $3,400 an ounce, Société Générale remains confident in the precious metal’s outlook. The French bank’s market strategists are maintaining a 7% allocation to gold through the third quarter, viewing it as both a strong momentum play and a hedge amid ongoing geopolitical uncertainties.
In its updated Multi-Asset Portfolio strategy released Thursday, Société Générale emphasized it is not rushing to take profits, with gold still trading below their target price of $4,000 per ounce. The strategists are bullish, citing continued central bank purchases and diversification away from the U.S. dollar as key drivers supporting gold.
“Protecting central bank reserves and decoupling from the U.S. is triggering de-dollarization,” the analysts noted. They forecast gold prices could reach $4,200 per ounce by the second quarter of next year.
In the short term, Société Générale expects gold to trade in a consolidation phase through the summer, averaging around $3,450 per ounce. They anticipate price momentum to accelerate in the fourth quarter and extend into the first half of 2026.
Historically, gold has been Société Générale’s sole commodity holding. However, ahead of Q3, the strategists added a 3% position in oil as a hedge against potential escalation in the Israel-Iran conflict. They warned that while immediate supply disruptions have not yet occurred, further Israeli strikes targeting Iranian economic infrastructure could pose risks to oil supply.
The bank projects Brent crude to reach $60 per barrel by the end of 2025, with an average price of $55 per barrel in 2026.
Additional portfolio moves include reducing exposure to British equities and increasing allocations to Japanese stocks and emerging markets. Société Générale also divested from all 10-year UK government bonds and high-yield U.S. and European corporate bonds. To adopt a more defensive posture, they purchased 10-year Treasury Inflation-Protected Securities (TIPS).
Despite inflation pressures easing more than expected last month, the strategists caution that economic uncertainty keeps inflation risks elevated. Factors such as weakening U.S. dollar, rising oil prices amid geopolitical tensions—especially near the Strait of Hormuz—and the delayed impact of trade tariffs continue to pose upward risks.
“Given the close link between tariffs and inflation, ongoing tariff negotiations are unlikely to ease inflation expectations,” the analysts said. “This uncertainty strengthens the case for inflation protection, making current low inflation expectations an attractive entry point.”
While Société Générale does not explicitly label gold as an inflation hedge, many market experts argue that rising inflation typically lowers real interest rates, which reduces the opportunity cost of holding gold, a non-yielding asset, thereby enhancing its appeal.
