(Kitco News) - Gold may be a crowded trade as prices consolidate below $3,400 an ounce, but one firm is not ready to give up on the precious metal just yet.
Société Générale's market strategists are maintaining their 7% exposure to gold through the third quarter, viewing the metal as both a strong momentum play and a hedge against ongoing geopolitical uncertainty.
In its updated Multi-Asset Portfolio strategy, published Thursday, strategists at the French bank said they are in no hurry to take profits, with prices still below their target of $4,000 an ounce.
The analysts remain bullish on gold as central banks continue to increase their reserves and diversify away from the U.S. dollar.
“Protecting central bank reserves and decoupling from the U.S. is triggering de-dollarization,” the analysts said. “Central banks’ purchases continue to be a driver of the gold price, which we estimate could reach $4,200 per ounce by the second quarter of next year.”
In the near term, SocGen expects gold prices to continue consolidating through the summer, with an average quarterly price around $3,450 an ounce. Price momentum is expected to accelerate in the fourth quarter and continue through the first half of 2026.
Historically, gold has been SocGen’s only commodity holding. However, ahead of the third quarter, the strategists have added a 3% position in oil “as a protection against escalation of the Israel-Iran conflict.”
“While immediate oil supply disruptions have not occurred, further Israeli strikes on Iranian economic assets could pose risks to oil infrastructure. We forecast Brent to reach $60 per barrel by the end of 2025, with an average of $55 per barrel in 2026,” the analysts said.
Additional portfolio adjustments include reducing exposure to British equities while increasing allocations to Japanese-listed companies and global emerging-market stocks.
SocGen also sold all its 10-year UK government bonds and high-yield U.S. and European corporate bonds. The French bank is taking a more defensive stance by purchasing 10-year Treasury Inflation-Protected Securities (TIPS).
Although price pressures eased more than expected last month, the strategists warned that persistent economic uncertainty keeps inflation risks elevated.
“Due to the quick succession of drastically different likely scenarios, upward risks to inflation persist for several reasons. Recession fears have declined, the U.S. dollar appears to be weakening, oil prices are rising amid geopolitical tensions—particularly regarding potential disruptions in the Strait of Hormuz—and the full impact of increased trade tariffs has yet to materialize,” the analysts said. “Given the close relationship between tariffs and inflation, ongoing tariff negotiations are unlikely to lower inflation expectations. All this uncertainty supports the case for seeking inflation protection, leveraging current low expectations as an attractive entry point.”
While SocGen does not explicitly cite gold as an inflation hedge, many analysts argue that gold remains a compelling monetary asset. Rising inflation is expected to lower real interest rates, reducing the opportunity cost of holding gold as a non-yielding asset.
