(Kitco News) – Gold’s failure to sustain gains above its 200-day moving average has reinforced its downward momentum, and the precious metal is approaching a crucial support level, according to analysts at Société Générale.
“Gold has struggled to establish itself above the 200-DMA during its recent rebound attempt, highlighting the persistence of downward momentum,” the analysts wrote in their latest research note. “If Gold fails to reclaim the recent pivot high near $4,315, the decline may extend.”
“The next supports are located around the projection of $4,095 and the June/July troughs at 3,960/3,940, which is a crucial zone,” they warned.
In mid-September, SocGen analysts said central banks are just getting started with interest rate hikes, but despite this new tightening cycle, they are unlikely to get in front of the inflation curve, which means there is still a solid reason to own gold.
The analysts said they remain overweight equities and commodities, with a specific focus on gold and copper heading into the final quarter of 2026.
The French bank said it is maintaining a 10% position in gold and a 10% position in broader commodities, unchanged from the third quarter. At the same time, it increased its equity allocation to 58% from 55% while reducing its exposure to government bonds to 12% from 15%.
“2026 YTD has been a year of sharp divergence across asset classes, with equities and commodities performing well while bonds have struggled. Our SGMAP portfolio, with its focus on equity and commodities, has delivered a strong performance against this backdrop,” the analysts said in the report. “Going forward, we believe commodities are an essential asset class to hedge against geopolitical and climate risk. A 60/20/20 portfolio, with 60% in equities and 20% each in bonds and commodities, may be better suited to the prevailing environment.”
SocGen said gold continues to play a significant role in its multi-asset portfolio as it sees a revival of the debasement trade, with geopolitical fragmentation and growing concerns about U.S. fiscal and currency credibility driving greater diversification away from traditional reserve assets.
“Central banks continue to buy gold while reducing their exposure to US Treasuries, as geopolitical fragmentation and concerns over fiscal and currency credibility support demand for alternative reserve assets,” the analysts said.
Along with robust central bank demand, SocGen said the cyclical environment is becoming increasingly supportive for the precious metal. Expected lower real interest rates later in the cycle should reduce gold’s opportunity costs as a non-yielding asset, while weakness in the U.S. dollar and renewed investment demand provide additional tailwinds.
“Structural diversification by central banks is now being reinforced by lower real rates, a softer dollar, and returning ETF flows,” the analysts said.
The bank noted that global gold ETF holdings have returned toward 3,000 tonnes, which it sees as confirmation that investment demand is rebuilding.
Against this backdrop, SocGen expects gold’s rally to have further room to run. The bank forecasts prices at $4,750 an ounce in the fourth quarter before reaching $5,000 by the second quarter of 2027 and $5,250 by the third quarter. Its full-year forecasts stand at $4,500 an ounce for 2026 and $5,125 for 2027.
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