The idea that gold could protect capital from inflation has been anchored in investors' minds. However, in 2022. Americans did not protect, as to date the return on gold is almost -1.5 percent. In other currencies the result looks a little better, but this is also not exactly protection against inflation, but more against devaluation of local currencies against the USD. Could 2023 change this?
The markets and the media seem to be making increasingly bold predictions for gold prices next year, which could more than make up for the current real losses against inflation.
As Juerg Kiener, managing director and chief investment officer of Swiss Asia Capital, told CNBC, gold prices could rise to $4,000 an ounce in 2023, as interest rate hikes and recession fears keep markets volatile. There is a good chance that the gold market would see a big move, he said, adding "it won't be just 10% or 20%," but a move that will take the market to new heights with momentum, Kiener added.
Kiener explained that many economies could face "a bit of a recession" in the first quarter, which would lead many central banks to slow the pace of interest rate hikes and could make gold immediately more attractive. He said gold is also the only asset that every central bank owns.
Source: Conotoxia MT5, XAUUSD, Weekly
According to the World Gold Council, central banks bought 400 tons of gold in the third quarter, nearly doubling the previous record of 241 tons during the same period in 2018. However, at the same time, gold fund units were sold by investors, which as a result may have offset demand from central banks. On the contrary, gold may have flowed by speculators/investors to central banks. In 2023, it would be investors who would have to return to this market to help lift gold prices toward new highs. According to the Statista website, the average annual return on the gold market between 1971 and 2019 was about 10 percent. This means that 2022 has deviated from the average, but will it be able to return to it in 2023? Perhaps we will find out in the first quarter, when we learn the Fed's latest decision on interest rates and the further pace of any increases.
Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service)
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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