SocGen is looking for a higher gold price in the short term

LONDON (Mar 25)  The gold price has moved 0.35% lower so far in the European session to trade close to the $1950/oz area. In the short/medium term French investment bank Societe Generale believes the price could remain bullish.

In its latest report, the bank said "the main reason our analysts see gold prices higher in the first half of this year is deeply negative US real rates due to a combination of high inflation and delayed Fed rate hikes. The implied expectations for rate hikes decreased, away from 50bps and toward 25bps, on the day of the invasion both for the May and March FOMC meetings."

In addition to this, they noted "implied expectations increased for June, September, November, and December. This, combined with high inflation, creates the perfect mix of negative real rates for gold. A notable source of demand came from Russian citizens who, in reaction to sanctions, quadrupled purchases of physical gold"

On the upside, the bank said "higher commodity prices and a wage-price spiral could cause inflation to rise even more than expected. A lack of improvement in the situation in Ukraine, or worse, an escalation of the conflict, would substantially support gold prices."

KITCO