Gold prices came under pressure in 2022 due to the aggressive Federal Reserve. However, ING expects the Fed to begin rate cuts next year and this pressure to ease. Meanwhile, gold will always play an important role in a portfolio as a safe-haven asset, according to a mining executive.
“Gold prices will recover next year as the Fed starts easing”
The strengthening of the US dollar and the tightening of the central bank put heavy pressure on gold in 2022. Next year, economists at ING expect gold to rebound as the Fed begins to loosen. In this context, economists make the following assessment:
We expect gold to remain bearish throughout the Fed’s ongoing tightening cycle. In the short-term, we anticipate further declines for gold prices amid monetary tightening. However, any hint of a easing in the Fed’s aggressive walking cycle will start to provide support for prices. For that to happen, we’ll likely need to see signs of a significant drop in inflation.
According to economists, it is possible for inflation to fall quite drastically in 2023. Economists say this will open the door for the Fed to begin a rate cut in the second half of 2023. Based on this, they make the following prediction:
Assuming we see the Fed easing in the second half of 2023, we expect gold to move higher through 2023. Thus, we estimate that gold prices will reach $1,850 in Q4.
“Recession fears and volatility in crypto markets will support gold”
According to one mining executive, gold will always play an important role in a portfolio as a safe-haven asset. However, investors need to watch out for copper as it will likely have more potential in 2023. Warwick Smith, CEO of America Pacific Mining, says that although copper prices were much more volatile than gold last year, its fundamental outlook makes it a slightly more attractive investment than the yellow metal.
In early 2022, copper prices briefly reached an all-time high. Copper to this move has risen to over $5 per pound. However, growing recession fears due to the Federal Reserve’s aggressive monetary policy stance put significant pressure on the industrial metal. Copper prices are trying to close the year with a 12% decline. It last traded at $3,891 per pound.
By comparison, gold prices are poised to end the year in neutral territory. That’s why it’s comparatively better than copper. Gold is trading at $1,855. Looking at the gold market, Smith says ongoing volatility in crypto markets, along with fears of recession, should continue to support the precious metal.
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