Gold price in 2023 as unpredictable as in 2022
As we approach the end of the year, investors are anticipating the year ahead and what to expect for precious metals like gold. The gold price was highly unpredictable in 2022, with much uncertainty over the direction it would take, while the price prediction for 2023 is also uncertain. The year 2022 had begun with the hopes of recovery.
The lifting of pandemic restrictions worldwide promised the beginning of a recovery, as people would be able to spend in ways that had been severely limited in 2020 and 2021.
However, as had been warned, the price of sustaining the global economy during the pandemic emerged; skyrocketing inflation drove prices higher, squeezing many people’s incomes. The invasion of Ukraine by Russia which seemed unthinkable just a few years ago, added the energy crisis to the mix. In an effort to reduce inflation, interest rates have been aggressively raised.
The gold price forecast for 2023, therefore, has various driving factors to consider, such as US dollar, geopolitical concerns, inflation and interest rates. Although no one can predict what will happen to gold in the future, how these factors continue to evolve in 2023 will affect its price.
US Dollar
In 2022, the dollar got stronger, which had a significant impact on the price of gold and other currencies. Compared to the major currencies, the dollar index, showed a 20-year high, and some investors turned to the dollar as a safe haven for their funds.
Despite increasing inflation, the US economy performed well, supporting low unemployment. Due to this, the Federal Reserve aggressively raised the country’s interest rates, which are now between 3 – 3.25%. This is much above the European Central Bank, which has a rate of 0.75%, and is comparable to the Bank of England, which has a rate of 2.25%.
As gold is valued in US dollars, the strength of the dollar has led to a lower price; over the past six months, the price of gold in US dollar has decreased by 14%.
If the Fed keeps raising rates aggressively and the US economy avoids a recession, the dollar is anticipated to be strong in 2023, keeping the price of gold stable. Ultimately, it would be expected that high interest rates would slow growth and could cause a recession even in a robust economy like the US. The dollar may decline again as a result, increasing the price of gold.