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Societe Generale sees continued pressure on gold prices

Economists at Societe Generale expect the price of gold to remain under downward pressure. Bearish inflows were $3.8 billion in the week to September 6, even more than the previous week, with gold inflows of $3.2 billion. Money managers are awaiting the Fed's key interest rate policy meeting on Sept. 20-21, where they expect the central bank to raise rates by 75 basis points for the third straight time.

The Fed's move to curb inflation by raising interest rates is expected to reduce gold's attractiveness relative to fixed-income products. Also, rising U.S. interest rates could increase demand for dollars, which in turn would make gold more expensive for foreign investors, reducing demand for gold.
China and India are two important markets for gold end-use: the two countries together account for about half of the gold demand. In this regard, the dollar appreciated 0.5% against the Indian rupee and 0.6% against the Chinese yuan in the week of September 6, adding to downward demand pressure on gold.
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