Societe Generale has explicitly reinstated its bullish stance on gold, asserting that the hawkish shock has been absorbed and current downside risks are limited. Deutsche Bank confirms that the inflection point for institutional capital has arrived, with hedge funds, asset managers, and banks successively buying, yet positioning remains at low levels. Major asset managers including Amundi, Robeco, and Fidelity have already increased their gold holdings during the pullback, with structural factors such as central bank purchases and de-dollarization providing a floor of support for gold prices.

The winds of change are quietly sweeping through the gold market. After months of adjustment, global top-tier investment banks and asset management institutions are returning to the gold market with rare unanimity: Societe Generale has turned bullish once more, Deutsche Bank has confirmed the inflection point for institutional capital, and several asset management giants are also adding to their gold positions.

In its latest market report, Societe Generale expressed renewed optimism for gold, viewing it as a vital tool for hedging against monetary and policy uncertainty. Meanwhile, Deutsche Bank opened its report released on September 3 with "The cavalry has arrived," pointing out that discretionary hedge funds, asset management institutions, and banks are successively buying spot gold, becoming the new dominant force in the market.

At the same time, according to Bloomberg reports, multiple leading institutions, including Amundi, Pictet, Robeco, and Fidelity International, have all increased their gold holdings during the price correction. From investment banks turning bullish again to institutions actually adding positions, the capital flow dynamics in the gold market are showing an increasingly clear shift.

Currently, gold prices are testing the $4,500 per ounce level, still notably distant from the earlier peak of around $5,600. However, multiple institutions believe this correction has actually improved gold's risk-reward profile. Although Fed Chair Warsh reaffirmed his anti-inflation stance at the Jackson Hole symposium, increasing gold's volatility in the short term, the market widely believes the impact of hawkish expectations has been largely digested, leaving limited room for further significant downside in gold prices.

SocGen Resumes Bullish Stance: Hawkish Shock Absorbed, Downside Risk Limited

In its latest report, Societe Generale clearly stated that after reducing gold positions in the first half of the year, the bank believes the time is now ripe to re-enter the market. Societe Generale analysts noted that gold experienced a sharp decline amid the dual shocks of the US-Iran conflict and rising expectations of Fed rate hikes, but has now returned to around $4,500. Meanwhile, market volatility has normalized, speculative net long positioning has rebounded above the two-year average, and the put/call ratio on GLD options has fallen to a six-month low, indicating market sentiment is shifting back toward bullish.

"Since 2022, there has been a clear regime shift in the market," the Societe Generale analysts wrote. Despite positive real yields, gold continues to trade near historical highs, significantly deviating from levels implied by traditional models. The bank believes structural factors, including sustained central bank gold purchases, de-dollarization, geopolitical uncertainty, and sovereign debt concerns, are providing a higher price floor for gold.

Regarding the interest rate path, Societe Generale economists' base case is for rates to remain unchanged until 2027, but they also acknowledge that if inflation continues to rise, the Fed could still hike once more this year. The bank believes that to pose a substantial shock to gold, inflation pressures would need to exceed current levels significantly, along with a more aggressive policy response from the Fed. "The hawkish adjustment has been largely digested by financial markets, and gold's downside risks appear increasingly limited."

Deutsche Bank's "Cavalry Has Arrived": Institutional Capital Inflection Point Confirmed, But Positioning Still Low

In the "dbMetals All-Metals Flow Report" released on September 3, Deutsche Bank's Head of Metals Research Daniel Ghali opened with "The cavalry has arrived," confirming that a structural shift is occurring in spot gold capital flows. The report notes that commercial and retail selling pressure, which had been suppressing spot demand since late summer, is drying up, replaced by successive buying from discretionary hedge funds, asset management institutions, and banks.

However, Deutsche Bank also emphasized that despite the emergence of buying, these institutional buyers' positions remain at notably low levels, with underallocation across spot, futures, and ETF dimensions. In a report from September 1, Deutsche Bank outlined the formation process of this change: over the past month, the spot gold market saw large-scale selling, with selling intensity reaching the 86th percentile of the past five years, primarily from commercial and retail capital. Meanwhile, CTA (Commodity Trading Advisor/trend-following algorithm) capital bought heavily, once pushing positions to 33% of historical maximum holdings.

However, the quantitative indicator measuring discretionary active capital participation barely changed throughout the late summer trend and has fallen 60% from its August peak. "This aligns with our assessment: discretionary groups remain underweight in gold," the Deutsche Bank report stated. This suggests the true institutional position-building phase may have only just begun, with upside potential not yet fully released.

Asset Management Giants Adding Positions, Gold's Allocation Value Returning

According to Bloomberg reports, several leading asset management institutions have recently increased their gold holdings or continue to maintain bullish allocations. Amundi, Europe's largest asset manager, has bought gold during the price correction and expects gold prices to return to $5,000 per ounce within the year. Lorenzo Portelli, Cross-Asset Strategy Head at Amundi Investment Institute, stated that gold is "an asset considered cheap, with good hedging functionality and reasonable liquidity," but before further increasing positions, greater clarity on the Fed's rate path is still needed.

Arnout van Rijn, Portfolio Manager at Robeco, views accelerating central bank gold purchases as the trigger for re-buying. World Gold Council data shows that in Q2 of this year, official sector net gold purchases reached 289 tonnes, setting a historical record for the period. "Gold has become a more widely accepted asset," he said, "and has become an indispensable part of every conventional portfolio."

Sophie Huynh of BNP Paribas Asset Management has noted the decline in correlation between gold and risk assets, meaning that after a round of speculative trading, gold's traditional hedging attributes are returning. "The froth in gold has receded," she said. "What drives gold prices now are fundamental forces such as central bank purchases and multi-asset managers seeking portfolio hedges."

Bridgewater founder Ray Dalio recently issued a stronger warning, advising investors to reduce bond holdings and allocate up to 15% of their assets to gold as a hedge against US debt risk.

$4,300 and $4,700: Key Thresholds for Gold Bull and Bear Capital

Although institutions are generally turning optimistic, potential risks remain, and key technical levels deserve particular attention. Deutsche Bank quantified algorithmic trading trigger thresholds in its report: if gold falls below $4,300 per ounce, it could trigger the next round of CTA programmatic selling; if accompanied by strong non-farm payroll data, further liquidation pressure could intensify. Conversely, if gold breaks above $4,700 per ounce, it could trigger subsequent futures capital follow-through buying, equivalent to 13% of the algorithm's maximum positioning.

Societe Generale also acknowledged that asymmetric pressures in current international financial markets cannot be ignored: the two-year US Treasury yield has returned above 4%, providing support for the dollar, while Fed Chair Warsh's Jackson Hole speech further reinforced market expectations of another rate hike within the year. According to Bloomberg reports, multiple surveyed asset management professionals also acknowledged that gold's breakthrough above the $4,600 resistance area will not be a smooth process.

However, at the structural level, Deutsche Bank offers a deeper perspective: what drives institutions and reserve managers to seek diversified allocation is more the multi-year bear market in Treasury bonds than the decline in risk assets themselves.

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