(Kitco News) – Gold delivered the predicted returns in the run-up to the U.S. election, and while the long-term drivers remain in place, the precious metal is likely to take a breather in the near term, according to analysts at Société Générale.
“Gold has recently disconnected from its traditional drivers, such as US real interest rates and the strength of the US dollar,” they wrote in the latest 2025 Outlook – Global Asset Allocation published on Nov. 19. “This divergence has largely been influenced by the uncertainty surrounding the US election and the build-up of a premium in gold prices. Now that the election is over, the key question is what the future holds for gold in both the short and long term.”
The analysts said that $250 per ounce worth of the gold price rally that was seen ahead of the U.S. election was not justified by the usual drivers, and that additional premium is now evaporating. “With the US election behind us, gold is gradually reconnecting with the strong appreciation of the US dollar and the increase in real interest rates observed in October and November started to exert downward pressure on prices,” they said.
“Long speculative future positions started to be liquidated from overextended levels and we expect this to continue in the short term,” the analysts wrote. “This should lead to the election premium partially fading and should see gold price weakness in the short term. The long-term drivers, namely large central bank gold purchases, growing US public debt, increased geopolitical risks, and global uncertainties stemming from a polarising world, all point to continued support for gold.”
Gold, along with U.S. stocks, have actually been the key components for the strong returns of the Société Générale Multi-Asset Portfolio (SGMAP) this year.
“The SGMAP portfolio has delivered double-digit returns, while exhibiting single-digit volatility,” they wrote. “Our overweight stance on US equity and gold has helped the performance. Going forward, we continue to prefer equities, gold and corporate bonds. We await better entry points before increasing allocation in government bonds.”
Other than the yellow metal, SG has turned its back on the entire commodity sector. “Apart from a heavy gold holding at 7% (unchanged) as protection against intensifying global geopolitical tensions, we have otherwise zero exposure to commodities,” they wrote.
SG believes that gold will likely face headwinds as the price drivers normalize. “As the election dust settles, gold faces short-term headwinds due to a reconnection with its traditional fundamentals – US dollar strength and rising real interest rates,” they wrote. “The $250/oz election premium is fading, and with it, speculative long positions are being unwound. The appreciating dollar, particularly against the Chinese Yuan and Indian Rupee, makes gold more expensive for buyers in these key markets, reducing demand. Similarly, rising real rates increase the opportunity cost of holding non-yielding gold, pushing prices down.”
“This convergence of factors suggests potential weakness in the $2,600-2,500/oz range,” the analysts said. “However, we believe this short-term dip presents an opportunity for investors to strategically accumulate gold.”
Société Générale also believes that the outcome of the U.S. election only strengthened the long-term bullish drivers for gold.
“Trump's victory, combined with a majority in both the House of Representatives and the Senate, strengthens the long-term bullish case for gold,” they said. “Expansive fiscal spending will accelerate US debt growth, with Trump’s policies being fully applied adding $7.5tn to the net deficit. In the long run, rising debt could weaken trust in the dollar, making gold a desirable safe-haven asset.”
“Heightened geopolitical risks under Trump’s protectionist and confrontational policies also add to gold’s haven, as the world becomes increasingly multi-polarised and dollar allure fades away as a result,” the analysts added. “Central banks, particularly non-western aligned ones, continue to purchase gold to diversify reserves. This trend is accelerating, as evidenced by record-breaking 2022-2024 purchases, further bolstering long-term support for gold prices.”
But while the broader outlook for gold remains positive, they warned that China’s domestic stimulus could further threaten gold’s price premium.
“A significant part of the $300/oz premium above gold’s theoretical value build in March-April was driven by Chinese investors turning to gold due to limited local investment options,” the analysts wrote. “Recent stimulus measures from Beijing, and the additional dry powder kept in reserve to adapt to Trump’s policies on China, could improve domestic investment opportunities. In such a situation, a shift of Chinese investment away from gold and back into local equities or real estate could result in a $300 correction in gold prices.”
Société Générale also devoted some time to analyzing the relationship between gold and bitcoin as safe haven assets.
“Bitcoin is likened to ‘digital gold’ for its potential as a store of value, with its scarcity, independence from fiat inflation, lack of reliance on government debt, and resistance to monetary policies, echoing key attributes of gold,” they said. “Around the US election, the two assets experienced different fortunes. Gold, with its deeply entrenched safe-haven status, rallied before the election as related uncertainties grew. In contrast, Bitcoin has rallied past $90,000 – up 30% since election day – largely on Trump’s pro-crypto stance, promising to make the US the ‘Bitcoin superpower of the world.’”
“Despite institutional interest with the quick adoption of recently approved Bitcoin ETFs – highlighted by BlackRock's iShares Bitcoin Trust, with $42bn AUM at the time of writing – Bitcoin’s volatility, often over 70% annually compared to gold’s 10-15%, challenges its perception as a stable asset,” the analysts noted. “Bitcoin’s drivers overlap with macro factors impacting gold but include unique influences such as regulatory developments and endorsements from figures like Elon Musk, whose pro-crypto advocacy stirred speculative sentiment. Musk’s long-standing support for crypto is well illustrated, as Tesla started to buy bitcoin (worth $1.5bn) to diversify and maximise returns on its cash holdings back in February 2021.”
“Ultimately, Bitcoin offers diversification with high-risk potential but remains sensitive to market sentiment, regulatory shifts, and speculation, serving as a complement to gold rather than a substitute,” they wrote.
Looking ahead, SG Markets projects the spot gold price will average $2,725 in the first quarter of 2025, $2,750 in Q2, and $2,850 in the third quarter, before topping out around $2,900 during Q4, for an average annual price of $2,800 per ounce.
