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Could Gold Reach $US4000 in 2023?

Original source: Australian Resources & Investments


Many analysts are favouring gold in 2023, and prices could soar to new heights amid recession fears and heightening demand.

One analyst believes $US4000 per ounce (oz) is on the table.

“Can easily see it somewhere priced between $US2500 and $US4000 … sometime during next year,” Swiss Asia Capital managing director and chief investment officer Juerg Kiener told CNBC in December.

“It’s not just China, but it’s the whole east that has been accumulating precious metals. All the central banks are accumulating precious metals.”

Kiener said the exchange for physical gold was incredibly tight.

“Wherever you look, there’s hardly any physical (gold) in size and if you look at size delivery, you have two-to-three-months delivery time,” he said. “That tells you the market is tight.

“When the market is tight, your outstanding positions are under pressure, so your short positions in the market are massive – you don’t need very much to move that market.”

Nikhil Kamath, co-founder of India’s largest brokerage Zerodha, advised investors to reserve up to 20 per cent of their portfolio for gold.

“Gold also traditionally has been inversely proportional to inflation, and it has been a good hedge against inflation,” Kamath told CNBC.

“If you look at how much gold you require to buy a mean home in the ’70s, you probably require the same or lesser amount of gold today than you did back in the ’70s or the ’80s or the ’90s.

“Interest rate cycles, I think, will continue to go up until they are higher than inflation … so by virtue of all of these factors we recommend having a 10 to 20 per cent allocation to gold in the portfolio.”

Fitch Solutions expects gold and lead to among the few commodities to average higher prices in 2023, with 19 commodities to average lower prices this year.

Fitch forecasts the gold price to average $US1850/oz in 2023, up from $US1800/oz in 2022.

“While gold prices continue to be dictated by competing economic forces as a myriad of risks surround the global economy, we believe the bearing of these issues are now toward the upside,” Fitch said in a recent report.

“On the one hand, gold remains above its pre-COVID levels and has gained ground in November as bond yields weakened, the US dollar peaked, the global economy remains on a slowing track with major economies slipping into recession, the war in Ukraine continues to evolve, and risks to the mainland Chinese economy persist.

“On the other hand, gold price strength will face pressures from mainland China’s slight easing of COVID restrictions and improving investor sentiment towards its economy, the likely peaking of inflation in Q3 (of the 2022–23 financial year) as well as the continued easing of restrictions worldwide as vaccination rates continue to rise.

“While we expect significant price volatility going forward, we expect gold prices to remain elevated in the coming years compared to pre-COVID levels.”

According to the World Gold Council, gold was trading at $US1856.6/oz on January 3, markedly higher than October 2022 prices, where the precious metal dropped below $US1650/oz.

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