The firm points out that precious metals have outperformed all currencies and other commodities in recent months, with gold up 22% in the past three months and silver up even more by 24% in the same period. They underline the stark contrast in asset performance with the South African rand being the best performing currency against the dollar during this period, being up just 4%. So, that speaks to the weight of gold’s outperformance.
Societe Generale argues that while this initially was a case of dollar-specific weakness, it is now starting to shift towards global fiat debasement concerns. That as the likes of platinum and palladium are also rallying alongside gold, which reflects a broader trend in chasing “real assets”.
As things stand, the firm is of the view that the dollar remains “overvalued in real effective terms”. And this makes for a case to “buy shiny stuff” with US deficit concerns and narrowing rate differentials set to weigh on the dollar outlook. Adding to the fact that gold is also widely regarded as a hedge for inflation and policy credibility risks, with the latter seemingly prominent these days.
In this current landscape, Societe Generale notes that: “It’s easier to spell out a bearish case for the dollar than a bullish one for anything else.”
As a reminder, the firm’s latest forecast is for gold to hit $5,000 by the end of 2026.
