Gold is expected to remain a safe haven in the face of an economic slowdown and rising inflation in the United States. The Federal Reserve will continue to purchase gold and add to its holdings as it seeks to bolster the economy. However, it is not yet clear what direction the market will take in the coming years.
China
China is the world’s largest gold consumer. In 2023, the price of gold is expected to rise to around $4,000 per ounce. This will be driven by a variety of factors. However, the interplay between inflation and central-bank intervention will play a key role.
Gold prices have reached new highs in recent weeks. It is now trading over $1,800 an ounce. As of November 28, it has broken above the 200-day moving average and is well above the 50-day moving average. The Dollar Index, meanwhile, is near a record high.
Some forecasts expect the Fed to cut rates later in the year. That could put pressure on the dollar and weaken gold. Others anticipate the dollar to remain strong and the gold price to increase.
Rising inflation
If you want to make money in gold in 2023, you must be willing to accept the fact that your return could be a little uncertain. There are a number of factors that determine how the market will perform, and the interplay between inflation and central-bank intervention will play a big part.
Rising inflation in the US led to the Federal Reserve boosting interest rates this year. Some forecasts expect the dollar to strengthen even further in the next two years. However, many analysts are predicting a more stable and positive performance for gold in the coming year.
As of the end of Q4, gold was trading at over $1,800 an ounce. This is down 14% from the record high it reached during the previous quarter.
Central banks adding to their holdings
Central banks are increasing their gold reserves. This is happening for several reasons. First, it is a hedge against inflation. Second, it provides diversification benefits to investors. Third, it is a way for central banks to protect their reserves from currency volatility. Fourth, it provides stability in the international monetary system.
The World Gold Council (WGC) reported that gold purchases by central banks increased in May. They added a total of 673 tonnes of gold in the first nine months of the year. These purchases are largely driven by fears of a global financial crisis.
In a recent survey, the WGC asked central bankers how they expected their gold reserves to grow in the next 12 months. Of the 57 respondents, 25 percent said they planned to increase their gold holdings.
Rising yields
While a number of analysts have slashed their predictions for the global economy in 2023, few believe that the gold price will go lower than it did in 2022. Amid a weakened dollar, an uncertain global outlook and rising interest rates, there are a number of factors to consider when interpreting the future of gold.
A recent study from ANZ Research revealed that holdings in all known gold-backed ETFs have dropped for seven straight months. The research firm sees gold prices falling to $1,575 by the first quarter of 2023.
Gold’s return in 2023 is likely to be stable, but positive. The key factors to watch include the US dollar’s strength, inflation and central bank policy. However, it’s important to remember that the relationship between gold and interest rates is not necessarily a direct one. In fact, inflation can offset the effect of high interest rates.
Goldman Sachs
It was a rough year in the markets last year. Global growth slowed through fiscal and monetary tightening and the Russian-Ukraine war. Those events sparked recession concerns. But the United States and Europe have so far avoided the repercussions.
The first half of the year is going to be tough, but stocks should rebound in the second half. Investors should take advantage of good days to ensure that they don’t miss out on the recovery.
According to Goldman Sachs, it’s unlikely that the US will experience a recession next year. But the global business cycle is still far from over. In addition, high inflation could lead to weaker corporate profits.
However, the Fed has made huge rate hikes and that is already weighing on equity valuations. While some investors are optimistic, others worry about the long-term impact of these moves.