Gold ended 2022 where it started, posting a 0.18% return, measured by LBMA prices. Performance was volatile, briefly retouching the all-time high from 2020 at $2,070, as prices benefitted from the war in Ukraine, before being dragged lower to $1,615, under pressure from higher interest rates and weaker global demand. Investor confidence in gold weakened further as the dollar asserted itself as the principal safe haven. Whilst record physical demand from central banks didn’t help to boost the gold price, it did help establish a level of support to the downside.
For 2023, we forecast the market will remain broadly neutral, and expect prices to consolidate and trade in a tighter range than in 2022. We believe the immediate drivers in the first half of this year will continue to be more focused on geopolitical events and less on the state of the global economy. The risk of further escalation in Ukraine, between Russia and the West, remains a major ongoing concern for investors. However, high prices at the start of year, close to all-time highs in many other currencies besides the US dollar, will present major headwinds to investment demand for bars and coins. The jewellery sector will also remain under pressure due to reduced consumer spending.
During the second half of the year, we foresee a firmer gold price due to the negative effects of the Fed’s aggressive monetary policy tightening in 2022, the deceleration of the global economy and as inflation rates stabilise. Therefore, we expect prices will test the upper price band forecast of $1,980 per ounce towards the end of this year.