Investing.com — Gold has performed in line with expectations recently leading up to the U.S. election, but Societe Generale (OTC: ) analysts believe the precious metal could take a breather in the near term.
Nevertheless, they see strong long-term drivers that underpin the yellow metal’s unique role in financial markets.
“Gold is the ultimate ‘unknown unknown’ commodity,” stated Societe Generale, noting that its primary value lies in its role as a hedge against unexpected and unexpected risks.
Unlike most commodities, gold market dynamics are not affected by general supply and demand fundamentals.
“It is broadly neither seasonal in its supply nor in its demand and is often considered a commodity-like commodity market,” the firm said.
According to Societe Generale, gold’s limited industrial use sets it apart from other resources, and emphasizes its status as a store of value with a unique monetary character.
“It is this monetary character that makes gold an alternative to fiat currencies and a stable store of value in volatile times,” explained Societe Generale.
The bank highlighted a number of drivers supporting gold’s current bullish momentum: continued fiscal austerity in the US, a possible shift in interest rate policy, weaponization of the US dollar in sanctions enforcement, and rising geopolitical risks.
He notes that investor sentiment has shifted significantly, with money managers, central banks, and ETFs simultaneously bullish on gold over the past quarter.
Societe Generale emphasized that “sentiment on gold has mixed with some sellers,” reinforcing its appeal as a hedge in uncertain times.
Although a temporary lull in gold’s rally is imminent, the firm believes its core strengths and role as a hedge against “unknown unknowns” ensure its continued relevance across portfolios.
