Inflation, geopolitics, central banks… what will move gold in 2023
Gold has done well in 2022. The precious metal gained 6% (in euros) last year. And since the beginning of 2023, it has gained about 2%. In recent months, the price of an ounce of gold has benefited from a significant depreciation of the dollar. Indeed, when gold is priced in dollars, when the US currency depreciates, the precious metal mechanically becomes cheaper for buyers in other currencies. Gold also benefited from a net decline in long-term rates in the US. It should be noted that gold does not yield income and thus automatically benefits from favorable arbitrages when real rates (long-term rates minus medium-term inflation expectations) fall.
Many brokers, management companies and banks are bullish on gold prices for 2023. Amundi believes the precious metal could benefit from an expected economic slowdown in the first half of 2023. Credit Suisse believes that the Fed’s future recession. monetary policy (which should slow and then stop raising the key rate) should support prices. JPMorgan believes that gold should remain high around $1,860 an ounce amid the expected decline in real rates. According to Pictet, gold is the most attractive alternative asset. And Société Générale believes that gold is a good tool to stabilize portfolios in the context of possible systemic risks (not uncommon historically after periods of monetary policy tightening by central banks).
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In addition to the trajectory of long-term rates, the evolution of inflation (and expectations of price increases over the next few years), geopolitical tensions and central bank gold purchases will be closely watched in the coming quarters.
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Although the rate of increase in consumer prices tends to decrease, there is reason to fear a possible system of structural, persistently high inflation due to the slowdown in globalization, the cost of the ecological transition, and the price of permanently high energy (hereafter). decrease in prices observed in recent months), notes Neuflize OBC. In Europe, the latest inflation figures were better than expected, with “an unexpected fall in energy prices partially explaining the decline,” but “the risk of rising inflation in the spring and this summer is high. energy prices”, warns IbanFirst. In addition, “the risk of setting up a price-wage spiral (higher wages encourage companies to raise prices, which reinforces new demands for workers’ compensation, a vicious circle, editor’s note) is felt in the United States,” warns Alain Guélennoc. , Chairman of the Board of Federal Finance Gestion (recent numbers were quite positive in this regard, right? Especially the revision of wages in November (+4.8%, not +4.6% as in the first estimate)
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Gold is also seen as a hedge against geopolitical risks that are expected to continue this year. “Since the Second World War, geopolitical tensions (and conflicts) have rarely been so numerous and intense,” notes the Comptoir National de l’or. The evolution of the ongoing war in Ukraine will also be followed, as well as tensions in Taiwan and the Sino-American rivalry. In this regard, many companies fear an attack on the island by Chinese forces. Comptoir National de l’or notes that the situation in the Middle East and Iran, as well as the threat of “more intense cyber attacks” in North Korea, will not be mentioned.
Very significant gold purchases by central banks of developing countries in 2022 should also be monitored. Many observers “expect the continuation or even strengthening of the policy of de-dollarization of foreign exchange reserves carried out by certain countries, mainly developing countries,” said the Comptoir National de l’or, “suggesting to watch for signs that China is hoarding money.” there are significant gold reserves.”
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According to these indicators, gold may be close to the purchase price
What does technical analysis say?
From a technical analysis point of view, the trend in gold is bullish, as the formation of an upward reversal configuration called a “double bottom” in 2022 (double bottomThe minimum target ($1,849) has been reached, the central scenario is an extension of the upward move towards the $1,896 resistance, notes Robert Haddad of Banque SBA (Fibonacci retracement 61.8% of the move below the peak). from March 2022 to the end of last autumn).
For our part, we note that the ounce of gold is being followed by a 20-day moving average (the average of the last 20 closing prices, adjusted daily – the rising blue curve that acts as dynamic support) and an upward trend. it combines the major lows of the last few months.
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Will gold become a mainstream investment?
Given these various elements, gold looks set to take its place in a diversified portfolio of assets for 2023. Especially since the trend remains bullish for now. However, we can closely monitor the evolution of inflation, geopolitical tensions and central bank purchases, which may affect gold prices.
