Gold 2023 Outlook and Review

2022 : Gold in Review

What a roller coaster ride last year was for precious metals. There were many factors influencing the markets over the year. Some continue and will weigh on price action in 2023.

2022 started quietly and on a soft note for precious metals. Market participants were primarily focused on multi-decade-high inflation rates. The war in Ukraine had not yet occurred and initial movements towards that eventuality were perceived by many to be a saber-rattling exercise. January was the quiet before the storm. Gold opened the year at $1,828.

In February precious metals prices exploded higher with the Russian invasion of Ukraine. Putin declared the invasion would be over in three days, the world aghast at the turn of events. Unified sanctions were quickly imposed against Russian businesses, individuals and state-run entities.

Metals prices continued to surge in March as well but failed to hold the gains by month’s end. By this point, Ukraine was receiving military support from the west and they were holding their own against the Russians. Simultaneously global central banks began to aggressively start hiking interest rates. March would prove to be the 2022 high price for gold at $2,070.

As the Russian invasion faltered, suffering defeat after defeat despite early gains, market jitters abated, and prices became increasingly influenced by other forces. The most important was coordinated and repeated interest rate hikes from central banks. Precious metals proceeded to spend the next seven months on a losing streak. Each month lower than the previous month, with the ultimate low for the year at $1,614 in September. This level would prove to be a significant support level. The October low was $1,617 and the November low was $1,616.

Prices moved higher in November after the prices failed to break the $1,615 support area for three months. Equity markets were also having a terrible time at this point to the benefit of metals prices. Gold in November was able to climb as high as $1,786.

December was also a positive month for the precious metals complex. Not as strong as November but strong, nonetheless. The high for the month registered at $1,833 and the final closing price was $1,823.

Looking at the January opening of $1,828 and the December close of $1,823, one might think it was an unremarkable year. Far from it. Given the market volatility, the only remarkable thing is how little the price changed at year open price and year-end price.

2023 : Gold’s Year Ahead

While nobody has a crystal ball or can be considered an oracle there are lots of clues to what direction precious metals are heading. Most market analysts are expecting consternation in global markets and economies this year. Volatility will be driven by fear that central bank interest rate hikes will begin to cause economic recovery after Covid to stagnate.

Precious metals should be relatively immune from downward pressure for a variety of reasons this year. The first and foremost is the relaxation of Covid restrictions in China. This will greatly ease supply chain disruptions that have been plaguing the manufacturing sectors for a long time. Especially manufacturers of electronic goods such as cell phones, tablets, and computers which all use precious metals to enable higher electronic connectivity.

The burgeoning Electronic Vehicle manufacturing sector also falls into this group. Especially as nations move to reduce or eliminate vehicles that run on fossil fuels.

Growing middle classes in India and China bode well for the global jewellery industry which is the largest consumer of gold annually.

A rising global population will only place more demand for precious metals moving forward. As more uses are discovered for metals with unique properties, this author thinks that their rarity will increase their value each year moving forward.