On Monday, spot gold hit its highest price point in the last eight months at $1,881.50 per troy ounce. By Tuesday, the price dipped slightly to $1,877 with the U.S. Federal Reserve’s official sign-off on more aggressive tactics to combat inflation. Despite these efforts, the labor market shows strength, and the lowered U.S. dollar value gives gold an added boost.
Saxo Bank’s leader of commodity strategy, Ole Hanson, explains further that “The metal has also been buoyed by the reopening in China with pictures of very crowded gold markets seeing pre-Lunar demand and the PBoC [People’s Bank of China] announcing it bought 62 tons of gold during the last two months of the year.”
Moving into later this week, Hanson defines the “next major hurdle” as $1,896 per troy ounce of gold following the U.S. CPI inflation print on Thursday.
The chief investment officer and founder of Livermore Partners, David Neuhauser, also expects gold prices to continue moving upward. As more investors realize the financial doom of currency debasement in the coming years, gold’s momentum will only gain more traction.
“I think as you look forward, you start to look around and think, ‘where is the safest place for your investment in terms of assets?’ and the only place really to go as an alternative now is gold, in terms of knowing that you are not going to see that debasement of your assets,”
“I have liked gold for several years. Looking at the dollar peaking, it has gained a little bit of a lift-off here for the past several months, so I see that continuing for some time.”
Gold becomes the silver lining during economic challenges. According to the precious metals investment firm Sprott, gold is a “clear macroeconomic winner in relative and absolute terms,” making it a safe and effective hedge against inflation.
During volatile market periods and soaring inflation rates, investors and banks flock to precious metals because of their long history of performing well when all else fails. Central banks purchased more gold in 2022 than any year prior since 1967. By the last quarter of the year, gold’s demand rates increased by 28% as more organizations and individuals flocked toward safety amid inflation.
As analysts predict more downward trends for the rest of the economy, gold will continue to perform. Current predictions show major economies entering recession periods, consistently high inflation rates continuing to climb, and uncertainty with central banks, all creating distrust in the U.S. dollar and many other asset classes. All these negatives mean one thing: more people will flock to gold, creating higher demand and, ultimately, higher prices.
John Hathaway, the managing director at Sprott, also agrees on the expected financial struggles to come this year. Hathaway adds that the mining shares and gold resources will prove to be “effective antidotes to ongoing macroeconomic chaos.”
“2023 will reveal that the gross mispricing of financial assets that led to the worst performance of financial markets since 2008 has been only partially resolved,” Hathaway continues. “We believe the bear market is far from over, even though investment sentiment is more negative than at the market lows of 2002 and 2008.”
In 2022, Credit Suisse and JPMorgan predicted gold prices to cap at $1,500 and $1,520, though it finished the year at $1,824. Hathaway points out how these figures prove that gold’s ability to act as a safe haven defies Wall Street predictions.
So what about this year’s predictions? For 2023, Credit Suisse forecasted $1,650, while JPMorgan leaned on the higher end, predicting $1,860 by the last quarter of 2023.
Greg Shearer of JPMorgan explains, “Even with a bullish baseline gold and silver forecast, we think risk is skewed to the upside in 2023. A harder-than-expected economic landing in the U.S. would not only attract additional safe-haven buying, but the rally could become supercharged by more dramatic decreases in yields if the Fed more rapidly unwinds tighter fiscal policy.”
The annual survey from the London Bullion Market Association with 30 analysts shows an average price forecast of $1,859.90 per troy ounce of gold for 2023. Most major players seem to agree that gold will remain on the rise this year as all else falls.
Investors can take advantage of these insights before prices climb even more. 2023 just might be the “year of gold,” according to Randy Smallwood of Wheaton Precious Metals. As always, investors should speak with their financial advisors before making any decisions.