Saxo Bank explains what makes the yellow metal hit $3,000 in 2023. But gold prices are still in danger of falling and giving up on recent gains, according to ING.
“It will be very good for the gold prices!”
Global economic uncertainty and escalating geopolitical tensions will ensure inflation remains consistently high through 2023. This will create a ‘world-class war economy’ that prioritizes local supplies and price ceilings. Saxo Bank says these extreme assumptions would be too good for gold for an estimate of $3,000.
“2023 will be the year the market finally discovers that inflation will remain bright for the foreseeable future,” Ole Hansen, head of commodity strategy at the Danish bank, said in the report. Hansen adds that the price target is not an official forecast, but rather a thought experiment on what would happen if extreme scenarios unfolded in the global economy. In this context, the analyst makes the following statement:
The important thing is not to be right, but to start a discussion about the challenges facing the global economy and how this will affect gold. Basically, a war economy is inflationary. We also expect investors to realize that central banks will not be able to keep inflation under control in 2023.
“2023 will be a year when faith in central banks will be shaken”
If inflation stays persistently high, Ole Hansen says, investors will have to reevaluate break-even rates. He also notes that any decrease in real rate expectations will likely weaken the US dollar. Hansen adds that gold has languished for most of 2022 as investors continue to believe central banks can bring inflation back to 2%. However, he also states that 2023 will be a year when faith will be shaken.
Ole Hansen says they see several scenarios that continue to support higher consumer prices for longer periods of time, including further development of local supply chains with a particular focus on the energy sector. A second factor is a development in the Chinese economy that will lead to a broad-based demand for raw materials.
“Gold prices will skyrocket to at least $3,000 next year”
Saxo Bank expects the Fed to end its tightening cycle in early 2023. Besides, he says the threat of a global recession will force central banks to pump liquidity into global financial markets. Hansen notes that these three scenarios, taken to the extreme, are things that will raise gold prices significantly. Accordingly, it points to the following level:
Gold cut the double top near $2,075 as if it wasn’t there. However, it will skyrocket to at least $3,000 next year.
“We will see further declines in the short term, but…”
Gold is still in danger of falling and giving up on recent gains, according to ING. But the long-term outlook is more constructive as the Federal Reserve moves from tightening to easing next year. Ewa Manthey, ING’s commodity strategist, says gold has seen dizzying gains in recent days. However, he notes that the rally has a high chance of extinguishing as the Fed continues to increase interest rates.
“We expect gold to remain bearish during the Fed’s ongoing tightening cycle,” Ewa Manthey says in the Dutch bank’s 2023 outlook. But looking ahead, things are starting to change for the precious metal, which has been weakened by this year’s strong US dollar and higher yields. From this point of view, stratesjit makes the following assessment:
In the short term, we will see further declines for gold prices amid monetary tightening. However, any hint of easing in the Fed’s aggressive walking cycle will start to provide support for prices. For that to happen, we’ll likely need to see signs of a significant drop in inflation.
“Gold will rise in the last quarter of next year”
The Fed will be ready to change tactics only when inflation begins to visibly cool. After all, that will probably happen next year. “We need to see inflation fall pretty drastically in 2023,” Manthey said. It will also open the door for the Fed to begin a rate cut in the second half of 2023,” he says.
As the Fed begins to loosen its policy in the second half of 2023, gold prices will rise and maintain their solid gains. ING predicts that gold will rise to $1,850 in the fourth quarter of next year. “Assuming we see easing in the second half of 2023, we expect gold to rise through 2023,” Manthey said. We also anticipate that prices will reach $1,850 in the fourth quarter of 2023.”
How about central bank purchases and physical demand?
Record gold purchases from central banks, one of the few drivers to help gold this year, will continue to support prices in 2023, according to ING. cryptocoin.com In times of economic and geopolitical uncertainty and high inflation, banks seem to be turning to gold as a store of value. The latest data from the World Gold Council show that central banks purchased 399 tons in the third quarter of 2022, up 341% year-on-year. This is also a record quarterly amount. Ewa Manthey comments:
The rate at which central banks accumulate gold reserves this year has not been seen since 1967. The current environment is likely to continue. Therefore, it is possible that central banks will continue to increase their gold holdings in the coming months.
Meanwhile, physical demand from China is expected to increase. However, the direction of gold’s price will depend more on investment flows. Also, things are not yet promising on this front. Manthey says the following about it:
ETF investors are responding to a challenging combination of significantly higher interest rates and a strong US dollar. Therefore, investment demand fell 47% year-on-year in the third quarter. The speculative position under COMEX further highlights the lack of investor interest.
