The price of gold hit a six-month high early Tuesday, and analysts believe the rally has further to go in 2023. The recent fluctuations in gold prices have been of great interest to economists and market observers alike. Starting at the beginning of November, gold prices have generally been on an incline, backed by a number of support factors. Market turbulence and a general rise in recession expectations have inevitably shifted investor focus towards safe havens, with gold an obvious choice. In addition, central banks have also been increasing their own holdings, further driving up demand and prices. 

Gold Surges to Six Month High

“In general, we are looking for a price friendly 2023 supported by recession and stock market valuation risks — an eventual peak in central bank rates combined with the prospect of a weaker dollar and inflation not returning to the expected sub-3% level by year-end — all adding support,” said Ole Hansen, head of commodity strategy at Saxo Bank.

Graph Showing Spot Gold Price

“In addition, the de-dollarization seen by several central banks last year when a record amount of gold was bought look set to continue, thereby providing a soft floor under the market.”

Looking ahead, Hansen suggested the key events for gold prices would be Wednesday’s minutes from the latest U.S. Federal Reserve meeting and Friday’s U.S. jobs report.

“Above $1842, the 50% [mark] of the 2022 correction, gold will be looking for resistance at $1850 and $1878 next,” Hansen added.

New All-Time High In 2023?

Global markets in 2023 will hang in the balance due to the decisions made by central banks this year. An easing of interest rate hikes is expected, but any decision made could stall a resurgence or cause global economies to fall into recession. The result could have devastating effects on the world economy, depending on the direction of monetary policy taken by central banks. As they move in a different direction from last year's aggressive stance, their choices can create more stability or increased volatility and all outcomes should be closely monitored. GDP, inflation and employment rates will also be important indicators to watch as financial leaders strive for optimum strategies with far-reaching consequences.

Eric Strand, manager of the AuAg ESG Gold Mining ETF, said last month that 2023 would yield a new all-time high for gold and the start of a “new secular bull market,” with the price exceeding $2,100 per ounce.

“Central banks as a group have continued, since the great financial crisis, to add more and more gold to their reserves, with a new record set for [the third quarter of] 2022,” Strand said.

“It is our opinion that central banks will pivot on their rate hikes and become dovish during 2023, which will ignite an explosive move for gold for years to come. We therefore believe gold will end 2023 at least 20% higher, and we also see miners outperforming gold with a factor of two.”

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