Gold Market Outlook 2023: What can we expect?

Gold fundamentals remain favorable in 2023 due to the combination of geopolitical uncertainty, the prospect of a recession and a weaker dollar. This is what the World Gold Council writes in a Looking forward on the gold market. Most of the factors influencing gold prices are likely to remain positive next year, but uncertainties will increase. On the one hand, a further rise in interest rates by central banks could have a depressing effect on the Gold price, but on the other hand, there is also a lot of upside potential for precious metals in the event of increasing geopolitical tensions or a correction in the stock market.

The World Gold Council listed three economic scenarios, namely a deep recession, a mild recession and a soft landing. In the first scenario, a significant increase in the price of gold is foreseen, due to falling stock prices and a fall in interest rates. Both of these factors have historically favored precious metals. In a mild recession, the positive and negative factors will keep the gold price in balance and the underlying geopolitical risk will support the gold price. In the scenario of an economic 'soft landing', the gold price may fall, but the chance of this scenario seems small due to the sharp change of course by central banks. Inflation and interest rate hikes by central banks are such that there is a good chance that central banks will overshoot their policy. For example, the market is already pricing in a Fed cut in the policy rate in 2023.

Geopolitical risk

According to the World Gold Council, the geopolitical risk of the war in Ukraine is one of the reasons why the gold price held up relatively well compared to other asset classes in 2022. Stocks, bonds and real estate all fell sharply this year, while the gold price remained almost unchanged on balance this year. Measured in euros, the precious metal is up almost 5%, in dollars the price is 2.5% lower than at the beginning of this year. In this sense, the precious metal has also lived up to its safe-haven status this year. Silver has achieved the same return as gold this year due to the catch-up of recent months.

The World Gold Council expects that the demand for Gold Coins and give birth in Europe will continue to be significant next year. Especially in Germany, Buy gold Currently popular, because of the many savings deposits that are set in motion by the combination of high inflation and low savings rates. Also, the Germans, like many other Europeans, are concerned about the energy crisis and the geopolitical situation on the continent. This combination of economic and geopolitical uncertainty makes investing in precious metals popular. For example, Some mints Keeping up with the demand for gold coins in recent months.

What is the price of gold doing in 2023?

Based on the three scenarios outlined by the World Gold Council, there is a good chance that the gold price will rise next year. However, the World Gold Council does foresee a shift within the gold market in 2023. This year, it was mainly private individuals who bought gold, while institutional investors reduced their positions in precious metals. This is reflected, for example, in the decline in gold stocks of ETFs. According to the World Gold Council, this has to do with the way individuals and investment funds look at the market. The first group reacts mainly to inflation, while institutional investors are more guided by developments in interest rates. Next year, that balance could shift, for example if central banks stop raising interest rates and institutional investors expand their holdings in precious metals again.

A sharp correction in the stock market could also result in large investment funds taking more gold into their portfolios. Historical data shows that during periods of stagflation and deflation – two likely scenarios for the coming year – gold outperformed stocks and bonds on average. Currently, share prices are still relatively high in relation to earnings per share. As a rule, a recession means that corporate profits fall and therefore stock prices will also fall. During these corrections, gold usually gains popularity among investors and mutual funds. This could give a boost to the gold market next year.

Gold has historically outperformed stocks and bonds in both deflation and stagflation (Source: World Gold Council)

Corporate profits fall in a recession (Source: World Gold Council)

Gold usually yields well after a recession (Source: World Gold Council)

Have a look at us YouTube channel

On behalf of Holland Gold, Paul Buitink and Joris Beemsterboer interview various economists and experts in the field of macroeconomics. The aim of the podcast is to provide the viewer with a better picture and guidance in an increasingly rapidly changing macroeconomic and monetary landscape. Click here  to subscribe.