The gold market has recently demonstrated strong resilience, with prices once again testing the key initial resistance level of $4,500 per ounce. After a deep correction lasting several months, Société Générale, a major international investment bank, has astutely recognized this shift in market sentiment and firmly believes that now is an excellent time for investors to reposition themselves. The bank points out that although gold still faces dual pressures from interest rates and the US dollar, market risk appetite is being reshaped, and gold's strategic allocation value as a core asset for hedging against uncertainty is once again becoming prominent.

A breakout from resistance is imminent, and signs of a market sentiment recovery are clear.

In their latest market report, Societe Generale analysts pointed out that after a period of reduced holdings in the first half of the year, the investment appeal of gold is making a strong comeback. The analysts stated that after a sharp correction triggered by the US-Israel-Iran conflict and rising expectations of a Federal Reserve interest rate hike, gold prices have rebounded rapidly and are approaching the $4,500/ounce mark. At the same time, the market's microstructure is releasing positive signals: market volatility has returned to normal, speculative holdings have recovered to above the two-year average, and the put/call ratio of the world's largest gold ETF, GLD, has fallen to a six-month low. The analysts emphasized that these indicators clearly show that bullish sentiment in the market is reigniting, and the return of funds is already taking shape, laying a solid foundation for further increases in gold prices.

With all pressure released, the risk-reward ratio has been significantly optimized.

Despite the continued pressure from a high-interest-rate environment and a strong dollar on the gold market, Societe Generale believes that the financial markets have largely absorbed the reassessment of the Federal Reserve's hawkish policies. This means that the risk-reward ratio for gold has fundamentally improved, presenting a more favorable allocation scenario. The bank's analysts further point out that the logic of the gold market has undergone a profound transformation since 2022. Even with consistently positive real yields, gold prices have remained strong near historical highs, completely breaking free from the constraints of traditional pricing models. Analysts believe that structural factors such as continued central bank gold purchases, the wave of de-dollarization, geopolitical uncertainties, and sovereign debt concerns have collectively built an unbreakable bottom support for gold prices, significantly weakening the negative impact of high real interest rates on gold prices and effectively limiting the downside potential for gold.

Limited expectations of interest rate hikes and concerns about inflation provide a solid backing for gold.

Market expectations regarding the Federal Reserve's interest rate hike path are undergoing a subtle shift. Societe Generale points out that since the middle of last year, market pricing logic has shifted from anticipating additional monetary easing to discussing whether the Fed will raise rates one or two more times. While this shift in expectations has pushed up short-term US Treasury yields and supported the dollar, it has failed to cripple gold prices, instead highlighting gold's resilience. Analysts say that for another major revaluation in the interest rate market to occur, a larger-scale inflationary shock and a more aggressive response from the Fed would be needed. Currently, the market has largely completed its hawkish adjustment, and the downside risk for gold is increasingly limited. Furthermore, the bank's economists predict that, under the baseline scenario, interest rates will remain unchanged until 2027. Even if persistent inflation forces a rate hike this year, its magnitude will be insufficient to shake gold's strategic position. More importantly, a new round of US tariff policies, accelerated investment in artificial intelligence and infrastructure, energy price volatility, and large fiscal deficits in developed economies are brewing a more severe inflationary environment than the market anticipates. Analysts believe that inflation risks are currently underestimated, which is precisely the core reason why investors should maintain a strategic exposure to gold.

Demand structure reshaping, central bank gold purchases form the market foundation

Beyond the improved macroeconomic environment, the underlying demand structure for gold is also undergoing a qualitative change, providing sustained support for gold prices. Although inflows into gold ETFs have slowed this year, they have still maintained a net inflow trend overall. More importantly, reduced market volatility is increasing gold's attractiveness to long-term reserve managers, rather than just short-term trend traders. This shift is expected to build a more solid and sustainable foundation for the market. From the perspective of official reserves, major Asian countries are steadily increasing their gold reserves, while diversifying reserves and reducing reliance on traditional assets has become a long-term structural strategic priority for many emerging market central banks. Analysts point out that as speculative demand gradually subsides, the purchasing power of official sectors is increasingly becoming the stabilizing force in the gold market. The continued strong demand for gold from central banks not only provides solid bottom support for gold prices but has also been validated historically as an important buy signal, indicating that the gold market is entering a steady upward cycle driven by official demand.

Conclusion

In conclusion, Societe Generale's optimistic outlook on gold is not based on short-term speculative sentiment, but rather stems from a profound understanding of structural changes in the market. With limited expectations of Fed rate hikes, underestimated inflation risks, and persistently strong central bank gold demand, gold is gradually shedding the constraints of traditional negative factors and demonstrating strong asset resilience. As the market risk-reward ratio improves and bottom support is continuously strengthened, gold has not only successfully withstood short-term volatility but is also expected to continue playing a core ballast role in asset allocation amidst an increasingly uncertain macroeconomic environment, initiating a new round of steady upward movement. Spot gold daily chart source: FX678. At 13:25 Beijing time on September 4th, spot gold was trading at $4470.81 per ounce.