Gold enthusiasts are looking to a bright 2023 for a number of reasons. Since the early months of 2020, when the COVID pandemic hit, gold has not lived up to the expectations of those who thought it would soar in value. Usually, when an international crisis erupts, the safe haven yellow metal starts moving skyward. Then, when the stock market began to tank in 2022, gold again defied all bets and never really took off. What’s going on, and what does 2023 hold for the world’s most beloved precious metal?
The Standard Chartered Report
A recent report from Standard Chartered (SC) made a couple of predictions about the upcoming year, and the reasons might surprise those who assumed gold was stuck in a lackluster sideways price channel. The SC estimates for 2023 indicate a $2,250-per-ounce level for the metal and a fall to $5,000 for the most famous cryptocurrency, bitcoin. The rationale behind the bitcoin estimate is obvious after one of the largest exchanges and hedge funds in the market, FTX, collapsed.
Is the Rise Realistic?
But what about gold’s potential rise to $2,250? Is it realistic? Based on several objective factors, it is. That’s because in addition to a highly volatile economic scenario, the metal will likely be buoyed by a lethargic stock market, crypto’s freefall, widespread fear of a full-fledged recession, and a possible resurgence of a global pandemic. Investors searching for an online gold trading platform should study the precious metals market, evaluate the various factors behind price moves, and make informed decisions about whether to include their favorite metal in their portfolios. Dozens of economic factors play into the metal’s primary purpose as a safe parking spot for capital in underperforming economic times. Consider the following factors that have the potential to support a significant rise in the price of gold.
The fall of FTX was the second phase of an already awful year for cryptocurrency in general and bitcoin in particular. Always known for its volatility, BTC (bitcoin) was on a ten-year run of ups and downs that usually ended with net gains. Even now, digital money devotees say that the recent drop of 60% in market value is a temporary setback. However, whether that turns out to be a wise prediction or not, it only fuels gold’s potential power headed into the early months of 2023. Many investors were beginning to view bitcoin and ethereum, leaders in the crypto niche, as safe havens for capital. Some expected high volatility and figured that was the price to pay for a potential upside that was seemingly unlimited.
The Ukraine-Russia war, among other international crises, has led to widespread volatility in commodities markets, especially petroleum and natural gas. An ongoing supply chain problem and China’s aggressive military stance in the Pacific rim are two other pieces of the volatility puzzle. Regardless of the identifiable causes, the fact remains that a seesaw commodities scenario feeds into the strength of all four precious metals. Millions of traders and investors view precious metals as a safer play than oil and other energy commodities.
Bearish Equities Market
The general historical rule is that when stocks rise, the price of precious metals either falls or remains relatively stable. Of course, the reverse is also usually true. But when the equities tanked in late 2022, many precious metals followers were surprised that their favorite metals had not gained traction. A quick look at the historical record shines a bit of light on this apparently illogical scenario. In many cases, there is a time delayed reaction in the interplay between stocks and precious metals. Will the first quarter of 2023 be the time for a catching up? One of the reasons so many people are bullish on the yellow metal is related to this factor. Plus, the stock sector is expected to continue to perform poorly due to a general economic slowdown, which would add more weight to a potential rise in gold’s price.
Fear of Recession
The fear of a major recession didn’t pan out in 2022. That doesn’t mean it won’t or can’t happen in the following year. Especially with inflation skyrocketing because of oil and the Ukraine-Russia war. In fact, with an ongoing East European war, a faulty global supply chain, and a freefalling crypto sector, the idea of an official recession is not farfetched. In economics, psychology plays a major role. The prospect of a rise in the price of all precious metals could result if that fear materializes. At the same time, US employment numbers are shaky, and most other major components of the national and global economy are warning of an excellent year for gold.