Gold: Central bank flows and real yields – Societe Generale

§ 01 Executive Snapshot

• What: Societe Generale analysts evaluate central bank demand for gold, projecting increased purchases.
• Who: Societe Generale strategists Michael Haigh and Jeremy Sellem, World Gold Council (WGC).
• Why it matters: Insights into central bank behaviors influence gold prices and market strategies.

§ 02 Key Developments

• Year to date, net central bank purchases of gold stand at +40 tonnes, mainly driven by Turkey and Poland.
• A forecast indicates an additional buying of 100–120 tonnes in 2026, which is double the volume recorded in the first four months of the year.
• Central banks' buying intentions are expected to resume visibly from Q4 2026, suggesting a shift in market dynamics.

§ 03 Strategic Context

• Historical data shows that central bank gold purchases are often concentrated and influenced by geopolitical factors, particularly from nations like Turkey and Poland.
• The correlation between gold prices and US real yields indicates how macroeconomic conditions affect gold's attractiveness as an asset class.

§ 04 Strategic Implications

• Immediate market implications include a potential increase in gold prices as central bank demand rises, particularly if real yields decline.
• Long-term operational implications suggest that sustained central bank purchases could solidify gold's role as a safe-haven asset during economic uncertainty.

§ 05 Risks & Constraints

• Potential risks include fluctuating real yields that could deter central banks from increasing gold holdings as anticipated.
• Competition from other asset classes may also impact the demand for gold among central banks, particularly if yields on bonds rise.

§ 06 Watchlist / Forward Signals

• Monitor central bank purchasing trends and UK gold export data in the coming quarters, especially from Q4 2026 onward.
• Upcoming changes in US real yields and economic indicators will signal the potential shift in gold's market stance and price movements.