Gold, which is known for being an inflation hedge, has not been spared by the global volatility of the markets. Indeed, the precious metal is on pace to record two consecutive years of declines for the first time since 2015, according to The Wall Street Journal.
Some experts believe, however, that the outlook for next year might be brighter, for gold, if, for example, “mild recession and weaker earnings,” were to happen, as they “have historically been gold-positive,” according to a World Gold Council 2023 outlook.
Typically, gold generally performs well during recessions, delivering positive returns in five out of the last seven recessions, according to the World Gold Council.
“On the flipside, a less likely ‘soft landing’ that avoids recession could be detrimental to gold and benefit risk assets,” the World Gold Council added.
Citigroup analysts corroborated that view, saying that high risks of a global recession could increase inflows into gold funds, “with prices potentially breaking out by mid-2023 to average more than $1,900,” according to The Wall Street Journal.
Some experts, such as Juerg Kiener, managing director and chief investment officer of Swiss Asia Capital, are even more bullish, predicting that gold prices could surge to $4,000 per ounce in 2023 as recession fears and an easing of interest rate hikes could make it more attractive, according to CNBC.
For now, gold is holding gains, trading around $1,800, the level it’s largely fluctuated around throughout December, said Craig Erlam, senior market analyst, UK & EMEA OANDA.
“It seems gold traders, like the rest of us, have an idea of what the Fed will do early next year but are holding back as it doesn’t quite align with the hawkish narrative coming from the central bank,” said Erlam. “Patience may well be key on that front but with momentum running thin, the prospect of a correction is growing.”
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