SocGen weigh out the pros and cons for gold
(Kitco News) - Société Générale has released its latest commodities report. The French investment bank questioned the commodities supercycle noting that searches and articles for the term have lessened significantly. In terms of the yellow metal, the bank noted flows look far less likely to push up prices.
In the report SocGen note "Gold’s limited gains in despite low rates and high inflation does not bode well for its prospects. Our economists are still slightly supportive in the near term as they are expecting monetary and fiscal policy to remain highly accommodative. However, our analysts’ conviction is mainly pinned to their expectation that the ETF outflows will cease, and we will begin to see some moderate inflows by the end of the year. And although real rates are still expected to be negative, any sign that they could turn positive faster would really dampen investment flows."
They also add "Sustaining costs rose, driven up by higher total cash costs which increased due to lower average grades, higher labor costs and other costs relating to the COVID-19 pandemic. Demand: Demand is normalizing globally, but jewelry demand specifically is not expected to recover to pre-COVID-19 levels yet, although our analysts expect to see some sort of return to normalcy"
There was no mention of silver but the report did talk about copper. The bank said sentiment starts to reverse and a large mine supply will confirm the downward trend in prices. Its analysts expect copper prices to continue to correct. Their bearish forecast for the current period has been reached, and they now expect the downward trend to continue. The bullish momentum and sentiment around talk of a super-cycle, energy transition, and green fiscal stimulus are fading.
On the supply side, the bank said, post-pandemic global trade rebound stalled in April–May this year. Supply bottlenecks and transport issues had a direct influence. There is a danger that the manufacturing sector will fail to meet pent-up demand quickly, effectively capping the upside growth potential for copper demand in the coming months.
Demand wise SocGen analysts expect consumption to rebound, however, as forecasted earlier this year, Chinese consumption has stalled recently on softening economics, especially in the manufacturing sector.