Gold Price Analysis: XAU/USD’s path to $2000 is losing conviction– Societe Generale

Analysts at Societe Generale warned that gold’s rally may not last until the end of this year, as the path to the $2000 mark appears to be losing conviction.

Key quotes

"The reflation theme must include gold, which is the one factor leading us to maintain a positive 2021 outlook. But if that story loses momentum, our supportive outlook could fall apart quickly.”

"We expect flows to be positive in 2021 on the reflation trade, but rising rates mean that there are conflicting forces affecting the gold price. It will be important to evaluate whether the market remains focused on real rates, which should stay slightly negative due to inflation, or nominal rates, which should rise and appears to increase the opportunity cost of holding gold,"

“Expect inflows of 100 tonnes this year will be enough to push prices to $2,000 an ounce.”

"If one or multiple sovereign debt crises emerged, we see gold investment rising, but there could be headwinds as the US dollar would then also strengthen,"

"Our upside economic scenario, which implies an extremely smooth and effective rollout of a vaccine, would still be the most bearish for gold as it would ease equity turmoil concerns and dovish monetary policies," 

"The larger downside risk of an improved economic scenario with higher rates would, we believe, add an additional 200 tonnes of ETF outflows and could subtract $200/oz if not more, off our base case forecast."