SocGen explains why gold is the ultimate ‘unknown unknown’ asset via Investing.com
Investing.com — Gold recently performed as expected ahead of the US election, but analysts at Societe Generale (OTC:) suggest the precious metal may soon take a breather.
Apart from this, they see strong long-term drivers that reinforce the yellow metal’s unique role in financial markets.
“Gold is the ultimate asset of the ‘unknown unknown’,” said Societe Generale, explaining that its primary value lies in its role as a hedge against unforeseen and unforeseen risks.
Unlike most commodities, gold market dynamics are not influenced by normal supply and demand fundamentals.
“It is generally not seasonal in its supply or demand and is generally considered a commodity market such as small commodities,” the company said.
According to Societe Generale, gold’s limited industrial use sets it apart from other resources, emphasizing its status as a store of value with a unique monetary role.
“It is this role of currency that makes gold an alternative to fiat currencies and a stable store of value over time,” explains Societe Generale.
The bank highlighted several drivers supporting the current gold momentum: continued financial manipulation in the US, a possible change in interest rate policy, the use of US dollar weapons to enforce sanctions, and the growing risks of the country.
They note that investor sentiment has shifted significantly, as money managers, central banks, and ETFs turned to gold at the same time last quarter.
Societe Generale emphasized that “sentiment on gold is mixed with few sellers,” reinforcing its appeal as a hedge in uncertain times.
Although a temporary pause in the golden circle may be imminent, the firm believes that its fundamental strength and role as a hedge against the “unknown unknown” ensure its continued portfolio performance.
