The only common theme during 2022’s year of economic volatility was uncertainty. The stock market took a turn for the worse while cryptocurrencies dipped to harsh rates. In response, central banks introduced new tactics to combat the extremely high inflation rates impacting nations around the globe.
Amidst this chaos, one asset class remained consistently positive: gold. Investors sparked a gold-buying frenzy in January 2023 as a form of financial refuge to protect their buying power from economic turmoil. At the start of 2023, gold increased in price by 5.7% as demand spiked from government buyers (like central banks), institutional sectors, and retail industries.
Portfolio diversification is not a new tactic, though more investors are realizing the value of securing their portfolios with assets that carry long-term outlooks. Gold is a staple investment for long-term performance, security, and hedging against inflation, making it ideal in 2023’s economic landscape.
According to the World Gold Council, consumers in the United Arab Emirates (UAE) purchased a collective 46.9 tons of gold jewelry products last year, showing a 38% increase from the year prior. This figure makes the UAE the top nation in the Middle East for gold sales, quickly outperforming Egypt, Kuwait, and Saudi Arabia. Demand levels in the Middle East reached 190.4 tons of gold last year, showing a 15% increase from the year prior.
The gold frenzy isn’t only occurring in the Middle East, though; it’s a global phenomenon. Global demand levels for gold reached 4,741 tons in 2022, displaying an 18% increase—the highest rates since 2011, an exceptional gold performance year. A clear shift in the market occurred in 2022, opening investors’ eyes to gold’s potential.
As gold continues gaining more traction, younger, more techie groups of investors begin innovating its investing platforms. Younger generations of gold investors have revolutionized the concept of digital gold, or DigiGold, platforms that allow you to store, trade, and sell precious metals online. Demand for DigiGold trading in the UAE continues spiking because of its improved convenience and reliability.
Gold’s primary downside as an investment class is its practicality. Transporting and storing physical gold, especially in large quantities, comes with many challenges, risks, and added expenses. Digital gold platforms erase these concerns, opening the gold investment class to much wider groups that wouldn’t have been able to manage the physical asset.
A survey from Axis My India shows that 15% of Indian youths (ages 18 to 24) want to begin investing in digital gold products. DigiGold platforms typically involve third-party vaulting services that secure your assets and manage your trading. It makes sense that digital gold trading has increased in popularity, considering the fall in cryptocurrency interest after 2022.
The most well-known cryptocurrency, Bitcoin, fell by 65% throughout last year. Conversely, gold increased by 0.4% by the end of 2022. Bitcoin’s decline caused many investors to pull their funds out of other cryptos, causing a general plummet in the market.
When comparing gold to crypto, investors can easily see one stable, strong, and predictable asset versus one that immediately fails the moment the economy begins to suffer. U.S. equities in 2022 also showed poor performance rates that boosted gold interest. The S&P 500 fell by 19.44% last year, displaying its worst performance rate since the 2008 Global Financial Crisis.
Equity performance rates last year showed investors that diversifying their portfolios by investing in another company’s success was a poor idea. The ideal backbone in any investment portfolio is one that can withstand a volatile market. Many investors finally realized this approaching 2023, which contributed to gold’s impressive price increases.
Gold’s success partially relies on global economic outlooks for the coming year. An improved economy would stabilize gold prices, though if the market continues spiraling, gold will move upward. Predictions from the International Monetary Fund (IMF), central bank efforts, and China’s COVID restriction lifts may show a slightly more promising outlook for 2023, though the Ukraine war proves that uncertainty will likely reign supreme for the next year or longer.
As unpredictability remains a common trend in 2023, investors can rely on gold as a safe haven. Analysts predict that gold prices will continue climbing throughout the year, offering sustained investment success. As global markets remain volatile, particularly in the Middle East, investors can rely on gold to protect their finances in the short and long term.
As always, investors should consult their financial advisors for individualized support before making any portfolio decisions.
