(Kitco News) - Gold is struggling to break out of consolidation, with prices capped below $3,400 an ounce. Still, the metal remains well-supported despite easing global uncertainty and shifting trading flows, according to Société Générale.
The French bank said short-term risks are emerging as uncertainty begins to normalize. However, analysts stressed that downside risks remain limited.
“ETF flows have remained stable, and the moderate managed money unwinding has, if anything, left us with a firmer footing, as this is the most volatile component driving price moves,” the analysts said.
Société Générale has maintained a bullish outlook for gold this year. In June, it said it would not sell any holdings until prices move above $4,000 an ounce—a level it expects could be reached in the second quarter of 2025.
Still, profit-taking is keeping prices rangebound. Spot gold last traded at $3,371.90 an ounce, roughly unchanged on the day.
“Earlier gold price strength this year was caused by the rare perfect storm of strong ETF flows, resilient central bank buying, and managed money traders adding to their long exposures. The number of managed money traders holding long gold positions (106) was unchanged over last week but the number of contracts being held by the longs decreased 2% over the week. ETF holdings dropped 5 tonnes (to 2,872 tonnes over the week) but are still at near-record highs,” the bank said.
Looking ahead, analysts said gold will take direction from the pace of uncertainty normalization or any breakthrough in the Russia-Ukraine conflict. Yet they do not expect a peace deal to undermine long-term demand.
“The freezing of Russian central bank assets created a very strong precedent that should keep central bank demand on a firm footing,” they said.
Although geopolitical uncertainty has eased since April, it remains nearly three times above historical averages.
“We don’t yet have complete August data for Chinese uncertainty indicators, but we forecast a further decline given the drop in weekly U.S. measures,” analysts said. “However, while Chinese uncertainty has eased, it remains twice pre-Trump levels. In the U.S., uncertainty is still three times normal. Yet ETF flows remain solid.”
