Will gold experience a fantastic awakening in 2023?

Gold has shown unabashed resistance this year. The price of an ounce of yellow metal is at the time of writing at the same level as a year ago, with large fluctuations during the period. A “performance”, given the sometimes very sharp falls in the prices of alternative investments (stocks, bonds, cryptocurrencies, real estate, etc.). Gold benefited from the hope of less stringency from the Fed on policy rates and from the sharp fall in long-term government bond yields. Since gold does not generate income, it automatically benefits from a fall in real interest rates (rates minus expected inflation) due to arbitrage phenomena.

Gold is also benefiting from the FTX scandal (the second largest cryptocurrency exchange on the planet), which has turned retail investors away from bitcoin and other virtual currencies a bit more. The price drop this year has been particularly anxiety-inducing. “Between the scandals and the hacking of cryptocurrency platforms, bitcoin has suffered a certain dissatisfaction in favor of gold, which has won its recognition as the only truly diversifying and safe reference asset”, notes Laurent Schwartz, president of the Comptoir national de l. ‘or , interviewed by Capital. The expert notes that the rise in the price of gold in November was “simultaneous with the fall of bitcoin”.

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Standard Chartered and Saxo Bank also believe in their “shock forecasts” (scenarios that the banks consider more likely than the market currently predicts) that the price of gold could potentially explode, reaching $3,000 according to the Danish bank and $2,250 dollars according to to the British bank, which in parallel imagines a further collapse in the price of bitcoin, up to 5,000 dollars, against the background of the phenomenon of communicating vessels between the queen of cryptocurrencies (often qualified as “digital gold”, which is not, as eg the precious metal which in theory cannot be “printed” indefinitely as the main currencies can be).

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Standard Chartered’s reasoning “is based on a scenario of a wave of distrust in cryptocurrencies, a possible fallout from the crypto crisis, a decline in confidence in digital assets and a strengthened position of gold. as a safe haven”, reports Laurent Schwartz.

Other structural support for gold prices: buying central banks (especially those in emerging countries). Central banks reportedly bought nearly 400 tons of gold in the third quarter, bringing purchases for 2022 to the highest since 1967, according to the World Gold Council. China in particular, which is reducing the amount of its holdings of US treasury bills and thus de-dollarizing, since 2012 has accumulated “discreet and patient gold reserves”, emphasizes Laurent Schwartz, for whom this accumulation of yellow metal reserves will help the Middle Kingdom “to establish an international stature of the yuan (renminbi), its currency”. Russia also appreciates gold. “It is really for Moscow the way to conduct transactions with other countries without going through the dollar”, argues the expert.

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As for the outlook, where will the price of gold go in 2023? The trajectory of the yellow metal will depend on the real rates. On this front, however, Laurent Schwartz expects high inflation to continue. And to counter this inflation, the big question, according to him, is to know “how far central banks will be able to raise their policy rates without dealing the death blow to the economy and causing irreversible damage”. I feel that the Fed is becoming “more cautious” after several turns of the screw, Judge Laurent Schwartz, especially because “many actors (individuals, companies, etc.) are heavily indebted and that Washington also wants to avoid weighing down the economy . a lot. ‘Global economy’. The expert thus expects the gold price to remain strong in 2023.

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