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What’s in Store for Gold in 2023

May 4, 2023

Gold Investors are always eager for clues about how gold is going to perform? Will the price of gold continue to increase in 2023 or will there be a decline?
No one knows for certain how gold will perform in 2023. Some financial experts, however, are confident gold will continue to increase in  value.  But as in any debate there is an opposing side.

Gold in 2022:
Slow Start, Great Finish

Before looking at the future outlook for gold, it’s important to review its recent performance. After underperforming for much of 2022, gold rallied late in the year and through the first month of 2023. More specifically, the price of gold increased by 14% from November 2022 through February 8, 2023.
The price increase might be attributed to lower interest hikes by Federal Reserve regarding interest rates battling inflation. The price also may have been assisted by the reopening of China’s economy and the resulting rise in jewellery demand.
The strength of the US dollar will also be a factor. If it continues to weaken in value as it did to the tune of 7% from November 2022 to January 2023, that might signal higher values for gold in the future.
According to Tim Maxwell, Investment Reporter with US CBS News, Gold may be poised for a big year in 2023, depending on interest rates, the strength of the dollar and other factors.

Gold is an attractive investment during periods of political and economic uncertainty. Half of the gold consumption in the world is in jewellery, 40% in investments, and 10% in industry. The biggest producers of gold are China, Australia, United States, South Africa, Russia, Peru and Indonesia. The biggest consumers of gold jewellery are India, China, United States, Turkey, Saudi Arabia, Russia and UAE.
In 2022, the price of gold reached an all-time high of $2074 US per oz.


The World Gold Council in its Gold Demand Trends (GDT) report called 2022 the strongest year for gold demand in over a decade


The World Gold Council (WGC) attributed the strong showing by gold to colossal central bank purchases and, aided by vigorous retail investor buying and slower ETF outflows, lifted annual demand to an 11-year high.
A gold ETF is an exchange-traded fund that aims to track the domestic physical gold price. They are passive investment instruments that are based on gold prices and invest in gold bullion. In short, Gold ETFs are units representing physical gold which may be in paper or dematerialised form.
According to the WGC, the investment portion of demand reached 1,107 tonnes in 2022, representing a 10% increase over 2021. Demand for gold bars and coins grew 2% to 1,217 tonnes, while holdings of gold ETFs fell by a smaller amount than in 2021, which further contributed to total investment growth.
Quarterly fluctuations in over the counter (OTC) demand largely netted out over the year. OTC markets are characterised by market participants trading directly with each other. The two counterparties to a trade bilaterally agree a price and have obligations to settle the transaction (exchange of cash for gold) with each other.
Annual gold demand (excluding OTC) jumped 18% to 4,741t, almost on a par with 2011 – a time of exceptional investment demand. The strong full-year total was aided by record Q4 demand of 1,337t.
Jewellery consumption softened a fraction in 2022, down by 3% at 2,086t. Much of the weakness came through in the fourth quarter as the gold price surged.
Investment demand (excluding OTC) reached 1,107t (+10%) in 2022. Demand for gold bars and coins grew 2% to 1,217t, while holdings of gold ETFs fell by a smaller amount than in 2021 (-110t vs. -189t), which further contributed to total investment growth. Quarterly fluctuations in OTC demand largely netted out over the year.
A second consecutive quarter of huge central bank demand (417t) took annual buying in the sector to a high of 1,136t, the majority of which was unreported.


WGC Outlook for 2023


Based on gold’s 2022 performance, the WGC said it has not altered its view of a good year for gold in 2023, with more upside potential than downside risk given a growing risk of recession in the US and Europe.
“A lacklustre 2022 for ETF and OTC demand is likely to set the stage for a year of growth in investment,” said the WGC, noting that “gold’s stable performance in 2022, despite strong headwinds from rising rates and a strong dollar for most of the year, has reignited investor interest.”
“Jewellery demand is also likely to capitalize on a resilient 2022, driven primarily by the reopening of China,” the WGC added. Gold investment itself has also become more diverse.
The advent of gold ETFs in 2003 opened up a significant source of gold demand and, over the course of almost 20 years, they have amassed 3,473 tonnes of gold holdings worth US$203bn. What was initially a largely regional phenomenon now boasts more than 100 physically-backed gold ETFs available across the globe, giving investors liquid alternatives to add gold to their portfolios.
Bar and coin investment has also remained popular worldwide. But most notably Europe is now one of the biggest regional gold investment markets in the world, accounting for around 20% of annual global bar and coin demand in 2022.
India and China have risen as super consumers of gold compared to when the World Gold Council first published its Gold Demand Trend newsletter in the 1990s. Back then, India and China accounted for less than 20% of total annual consumer demand combined. Today these two countries make up nearly 50%
China’s role in today’s global gold market is almost unrecognizable from that of thirty years ago. Gold has long played a culturally important role in China. But for half of the last century individuals were banned from buying and trading gold. Gradual easing of restrictions during the 1990s culminated.
In the Shanghai Gold Exchange being set up in 2002, with full market liberalisation complete in 2004. The nation’s gold consumers responded swiftly: demand for gold jewellery, bars, and coins ballooned.
China’s annual gold consumption has risen five-fold – from a little over 375t in the early 1990s to a record high of 1,347t in 2013. Since then, China has been the world’s largest gold consuming country.
Central Bank buying however is unlikely to match 2022 levels, according to the Council, as demand remains difficult to forecast partly because it can be policy driven and does not always respond to the most common economic drivers.
“Lower total reserves may constrain the capacity to add to existing allocations. But lagged reporting by some central banks means that we need to apply a high degree of uncertainty to our expectations, predominantly to the upside,” the WGC said.


Not So Fast! Gold may be lower in 2023 predicts gold expert Harry Dent


Gold to be hardest hit commodity in ‘massive crash’, bear market in early stages predicted pessimistic, Harry Dent (an American financial newsletter writer. Harry’s 2009 book, The Great Depression Ahead, appeared on the New York Times Bestseller List) in an interview with Kitco news in the end of January, 2023.
Dent predicts a dire 2023 for Gold, which has been trading up for 2023 and was at  $1,930 per ounce at the time of the Kitco interview.
Higher gold prices and demands will reverse in 2023 and have a dramatic decline as “the biggest crash in our lifetime” enters its second wave, according to Dent. And the pessimistic Dent maintains 2024 will be even worse. Dent is calling for gold to reach as low as $900 per ounce by mid-2024.
“Gold is not a safe haven,” he maintained. “I’m predicting that gold goes down between $900 to $1,000.
By way of explaining his predictions, Dent said that an “everything bubble” has been manufactured by the U.S. Federal Reserve’s loose monetary policy, which had caused booms in most asset classes, especially stocks.
“The next wave” downwards will occur once this critical level is reached, he added. From its all-time high, Dent expects the NASDAQ to fall 92 percent and the S&P 500 to fall 86 percent.
Gold will crash, along with other assets, to $900 per ounce, said Dent, but will ultimately reach $4,000 after markets recover and whenever the next economic boom takes place.


Gold will be golden in 2023 but be smart about it


Prudent investment dealers advise investors to proceed cautiously. The demand and price for gold can be influenced by many factors. As Tom Maxwell, of CBS News notes, “ no one can predict what the future holds for the price of gold, it’s important to understand where gold might be headed in 2023 before you invest in this precious metal.”
As with any investment, always research or consult your financial advisor before investing in an asset.   
Whether gold’s value soars in 2023, as some analysts predict, or crash as Harry Dent predicts, remains to be seen.


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