Gold price to highest level in six months

The Gold price rose to $1,860 per troy ounce this week, hitting its highest level in six months. The Silver price At the end of December, it already exceeded $24 per troy ounce, recording the highest price since April last year. Both precious metals are benefiting from a weaker dollar and rising recession fears. What is the outlook for the precious metals?

In 2022, the rapid rise in interest rates put an end to the high valuations of stocks, bonds, and cryptocurrencies. Gold and silver, however, managed to end the year with a small price gain. This year, too, the precious metals have come out of the starting blocks. The market does not expect any more major interest rate hikes this year, which is theoretically beneficial for precious metals. Also, the likelihood of a recession increases, which precious metals usually benefit from.

Gold price to $3,000?

It's hard to say what the prices of precious metals will do this year. According to commodity analyst Ole Hansen of Saxo Bank, this could be a golden year, with the price of the yellow precious metal rising to $3,000 per troy ounce Rises.

He bases his price target on the expectation that inflation will remain high this year as countries around the world bring more industry back to their own countries in order to become less dependent. As a result, the prices of products will rise. He also expects this to be the year in which the market will lose confidence in central banks. Central banks will fail to get inflation under control, which will increase the flight to precious metals.

According to Hansen, the precious metals could also benefit from a pivot in central bank policy this year. For example, there is already plenty of Speculated about cutting interest rates and restarting asset purchase programmes if nervousness in the financial markets increases. For countries that want to become less dependent on the dollar, that could be a good time to buy gold, according to Saxo Bank's commodities analyst.

Gold price in euros per kilo

Silver price in euros per kilo

Weaker dollar

The rise in the price of gold and silver is partly attributable to the weaker dollar, as historically the precious metal has had a negative correlation with the US currency. The dollar index peaked in October, when gold prices bottomed out at around $1,640 per troy ounce. Since then, the price of gold has been on the rise again and the Dollar index by almost ten percent.

Dollar index falls again after long upward trend (Source: Marketwatch)

Measured in euros, gold prices rose this week to more than €56,400 per kilo, the highest price since early October. The silver price rose to €740 per kilo this week, reaching the highest level since April last year. Whether that upward trend will continue into the rest of 2023 is, of course, down to many different factors dependent.

The outlook for precious metals is favourable, but if central banks continue to raise interest rates, this could put further pressure on prices. But in that scenario, the prices of stocks and bonds will come under more pressure than those of precious metals, just like last year. On balance, therefore, the outlook for precious metals this year looks positive.