Gold market 2023 is expected to have many 'waves'
Many experts predict that the gold market next year will catch a "wave" thanks to the slowing pace of interest rate hikes by central banks and strong fluctuations in the financial market.
The CEO of financial services firm Swiss Asia Capital (Singapore), Mr. Juerg Kiener, has just given an optimistic forecast, saying that the world gold price could reach 2,500 to 4,000 USD per ounce next year.
Juerg Kiener said the precious metals market is likely to be volatile and "not just increase by 10% or 20% but may set new records". The basis for this prediction, according to him, is due to interest rate adjustments and the risk of a global economic recession causing financial market volatility.
Many economies could face a “mild recession” in the first quarter of 2023, which would see central banks slow their rate hikes and make gold immediately more attractive, according to the CEO of Swiss Asia Capital.
He also added that since the 2000s, the average return on gold in any currency has been between 8% and 10% per year. The precious metal is also the only asset that every central bank owns, Juerg Kiener said.
According to the World Gold Council (WGC), central banks bought 400 tons of gold in the third quarter of this year, nearly double the previous record of 241 tons in the third quarter of 2018.
Some investors have recently increased their gold purchases. For example, the world's largest gold ETF, SPDR Gold Trust, has just returned to net buying 1.73 tons of gold after selling 5.79 tons in the previous session. However, the amount of gold owned by this fund is still at a low level in the past month at more than 906 tons.
In fact, gold prices are largely directly affected by the performance of the US dollar. During the third quarter, global gold prices fell due to the appreciation of the greenback. Higher interest rates reduce the appeal of gold, which is traditionally a hedge against inflation, because they increase the opportunity cost of holding non-yielding assets.
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| Gold bars on display. Photo: Bloomberg. |
Mike McGlone, senior macro strategist at Bloomberg Intelligence, even suggested that gold may have “bottomed” this year. “We see gold as a top-performing commodity in 2023, especially if the Fed starts easing,” McGlone said. McGlone is leaning toward a scenario where the precious metal could break above $2,000 an ounce next year and not return to 2022 levels after the Fed transitioned from its fastest pace of tightening in 40 years to easing.
In the report "Financial Market Surprises 2023", Standard Charted also mentioned one of the scenarios that the market rarely thought of: gold benefits when Bitcoin continues to plummet and falls to the $5,000 region next year.
Standard Charted’s global head of research, Eric Robertsen, said that in this scenario, the precious metal could reach $2,250 an ounce as investor confidence in the cryptocurrency ecosystem plummets. He did not rule out more pain ahead for the cryptocurrency market, following a string of disappointing news this year.
Many other experts also give a positive scenario for the precious metals market next year, but are somewhat more cautious.
According to expert Nguyen The Hung of the Vietnam Gold Business Association, the Fed has raised interest rates six times since March 2022, which has helped the USD strengthen, coupled with the financial market's upward fluctuations, causing some investment funds to sell gold to shift to profitable investments.
He said that, normally, gold prices will stagnate in the third quarter of the year and increase sharply again at the end of the year due to the influence of market demand. At the end of 2022 and early 2023, gold prices could approach $1,950 per ounce if there is additional support from the financial market. In the scenario of maintaining this price level, the precious metal will be "cleared" to increase back to $2,000 per ounce as at the beginning of the year.
However, Mr. Hung noted that investors have to sell gold to solve liquidity when the financial and monetary markets are constantly fluctuating and cryptocurrencies are plummeting. "Therefore, gold may increase but it will not be as large and sudden as some times in 2021 and early 2022," Mr. Hung shared.
Some analysts also noted that gold's rally could be hit by resistance around $1,800 an ounce. Marc Chandler, CEO of Bannockburn Global Forex, said momentum indicators on the price have yet to recover. "I still think a bigger pullback could be coming, but so far gold has been more stable than I thought," Chandler said. "That seems to be in line with the U.S. dollar."
This year, the world gold price exceeded 2,000 USD/ounce in early March due to the escalating tension between Russia and Ukraine, but it did not last long. The precious metal then went down and for the rest of the year, it mostly traded below 1,800 USD/ounce.