Société Générale elevates gold as essential policy hedge

The French bank recently increased its gold allocation to 10% for the third quarter, up from 7% earlier this year. This strategic adjustment reflects a concern that current Federal Reserve expectations fail to account for medium-term inflationary pressures. Factors such as new U.S. tariffs, intensive AI-driven infrastructure spending, and volatile energy costs suggest price pressures will remain elevated longer than anticipated. Even if interest rates tighten further, analysts argue that market-based expectations remain disconnected from the Atlanta Fed’s Taylor Rule calculations, leaving a clear opening for gold to serve as a buffer against policy uncertainty.

Gold’s resilience throughout 2025, even as two-year Treasury yields climbed above 4% and the U.S. dollar strengthened, demonstrates its decoupled strength. While tactical demand from exchange-traded funds has cooled, central bank buying—led by China and other emerging markets—now provides a structural floor for prices. By diversifying into commodities like copper and inflation-linked bonds alongside gold, the firm aims to address specific risks rather than relying on a single hedge. With much of the hawkish monetary adjustment already priced into the market, analysts see limited downside, viewing gold as an essential anchor in an increasingly unpredictable geopolitical environment.