SocGen thinks real interest rates could bounce back to push gold. Societe Generale has released its latest commodities report, and that’s not good news for gold buffs. The French investment bank thinks real rates could turn positive again, which could push the yellow metal down. Detail Cryptocoin. com
Will gold fall?
In the SocGen report, it is pointed out that even high inflation rates do not benefit enough from gold: “Deep negative real interest rates in high inflation push the gold price in the short run. Gold’s limited gains in 2021 despite low rates and high inflation do not bode well for prospects. Our analysts are still somewhat supportive in the near term.” Talking about inflation, SocGen said, “Inflation is expected to decline in the second half of next year, while interest rates are slowly rising. U.S. real rates should turn positive again by the end of 2022 and gold should see gold close.”
The role of central banks
Pointing to the role central banks will play in gold prices, the SocGen report draws attention to banks’ gold reserves: “Central banks’ gold purchases should also be one of the factors that support the price in the long run, and should avoid a sharper price decline when real rates rise. The gold reserves of central banks, especially in EM countries, China and India, are low compared to western economies. In a world that has become more multipolar and US debt swells as a reserve currency, the US dollar is losing credibility and central banks are eager to diversify it by creating gold reserves. ”
SocGen also talked about base metals. Copper has been consolidating lately and the bank considers the supply-demand balance to have peaked. Here are SocGen’s views on copper: “Sensitivity is starting to reverse. The massive mineral supply will more than double the downward trend in copper prices from 1Q20. When COVID hit the global economy, it lasted until May 2021, but this impressive rally then stalled and prices have been on a downward trend over the past six months. Manufacturing PMIs, an indicator of copper demand, showed a downward trend for the US and eurozone in the third quarter, while China appears to have found a foothold. According to the bank, there is a danger that the manufacturing sector will not be able to quickly meet the pent-up demand, effectively limiting the potential for upside growth in copper demand in the coming months.