If you’re looking for some updates on the gold spot, you’ll find it in this article. The interplay between inflation and central-bank intervention is likely to be a key factor in determining how gold does in the coming years. In addition, uncertainty around consensus expectations for 2023 will also impact the metal’s performance.
Silver is the precious metal to buy for 2023
A strong US dollar may have weighed on gold and silver prices in the last couple of years, but the US economy is slowing, and this could be the catalyst for gold and silver’s resurgence says The Gold IRA Companies. In this article, we’ll look at what could drive the price of both metals to new highs in 2023.
The “fiat decline” inflation theory posits that the loss of confidence in fiscal and monetary policy will drive inflation higher. As a result, the “fiat” (i.e., paper money) supply is being rapidly depleted, making silver a popular alternative.
Silver is often used for its microcircuit applications, superconductor properties, and batteries. These uses have led to the rise of demand for the metal.
As the world transitions towards a less dependent on oil, silver demand will continue to increase. This is particularly true as countries with zero-carbon emission targets increase their usage of the metal.
The shift to solar energy will also boost demand for silver. Demand for the metal will continue to be robust in 2023.
Another factor contributing to the return of silver is the destruction of currencies’ purchasing power. In this regard, gold and silver are the best hedges against fiat currencies.
One of the most important factors affecting the price of gold and silver is the speed of global central bank tightening. Aggressive rate hikes by major central banks have roiled investor sentiments.
Interplay between inflation and central-bank intervention will determine gold’s performance
A year-long deceleration of the global economy, coupled with central bank intervention, is putting inflation front and center. As such, the interplay between inflation and central-bank intervention will play an important role in determining the performance of gold in Q1 2023.
The latest non-farm payrolls report shows a modest 263k jobs added. However, this number does not tally with a recession in the first and second quarters of 2023.
Historically, gold has performed well in a recession. Indeed, five of the last seven recessions have seen positive gold returns.
However, the ‘goldilocks’ environment is unlikely to materialize until H2. For the time being, inflation is more likely to be the gold-trailing event. Moreover, the impact of a monetary shock is still rippling through the economy.
In the past year, the global economy has been subjected to numerous shocks. Among these is the “Great Rate Reset” that sent markets reeling. Central banks have stepped up their game, inking massive injections of liquidity in an effort to cushion market shocks. This has left many areas of supply tight.
During the 1970s, the US experienced a period of incredibly high inflation. However, this episode did not repeat itself. That said, a milder retrenchment would probably be a good thing for gold.
Uncertainty surrounding consensus expectations for 2023
Gold price forecasts are influenced by a variety of factors such as the US dollar, economic growth, and global political conditions. While there are some similarities in how these factors affect gold prices, there are also some differences.
The first quarter of 2013 is expected to see the price of gold rise above the US$ 2,000 mark. However, the price is not expected to exceed that level in the following two years. In 2021 and 2022, the average price is projected to be around US$ 1.973.8 per troy ounce. This is a 4.6% increase over the price in January 2021 and a 10.5% increase over the price in 2020.
A number of analysts have lowered their forecasts, including those by J.P. Morgan Commodities Research. They expect the price to be around US$ 1,412 in 2020 and US$ 1,355 in 2019.
ABN Amro has also lowered its expectations, but with better net speculative positioning. It expects the Fed to raise its fed funds rate by 4% by early 2023.
UBS revised its end-June 2023 gold price target to USD 1,650/oz. It predicts a decline in inflation, but does not expect rates to drop to sub-3 percent by year’s end.
In addition to the interest rate outlook, the economic environment plays a role in gold price predictions. There are fears of a recession in the US. But the underlying economy remains firm. As a result, economists expect the global economy to grow by just 2.1% in the next year.