SMM Network News: Societe Generale (Societe Generale) said that gold prices are expected to rise in the first quarter of next year. But then gold may encounter resistance as the global economy recovers.
In its latest report, the bank said it expects gold to average $2200 an ounce in the first quarter of next year, but will then fall as market risk declines.
"as the impact of the epidemic on the global economy dissipates and the economy recovers, the world will return to a near-normal environment."
Soci é t é G é n é rale said that for the gold market, a key factor is investor demand, that is, gold ETF.
Global gold ETF inflows are strong this year, growing by 41 per cent compared with last year. The bank believes that if it continues with such strong inflows, gold prices could rise above $3000 an ounce over the next 12 months.
"Gold ETF holdings are unlikely to increase by 41 per cent, or about 1382 tonnes, in the next 12 months, and such a big increase is unlikely to happen again, as fund managers and retail investors have basically increased their gold allocations."
The bank expects global gold ETF demand to increase by 9.5%, pushing gold prices back above $2000 an ounce.
Because the entire gold market is very dependent on investment demand, the performance of the global economy is important to it. Soci é t é G é n é rale believes that the global economy will be L-shaped and interest rates will remain low to support gold.
"this assumes that all kinds of fiscal stimulus and monetary measures cannot promote financial and economic recovery."
In this case, there could be a large sell-off across the market, similar to the multiple circuit breakers of U. S. stocks in March, dragging down gold.
But the bank said investors could also shift money into gold because of a lack of confidence in the stock market to continue to rise.
"in the case of an L-shaped economy, the inflow of gold ETF will maintain the activity of gold prices."
In addition, the high level of global debt is also a concern, in the event of a debt crisis, it will also push up the price of gold.
"the global economy is in recession, government spending will be affected in the capital in the next few years, the rise in debt levels is unsustainable, and investment demand for gold will increase in the event of a sovereign debt crisis."
The bank said that if there was a V-shaped recovery in the global economy, global stock market volatility would ease and expectations of dovish monetary policy would be reduced, which would be bad for gold.
"investors will reduce their holdings of gold, and gold prices are likely to fall as they did in 2013."
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