Grant Sporre

We expect gold to gradually lose its lustre over the course of 2023, as the Fed tames the inflationary environment in the US, and ends the rate hike cycle in Q3 this year. Markets may also become gradually immune to the war in the Ukraine, with tensions possibly easing toward the year end, which could also see an easing in the strong central bank buying. All of these factors could see investors reassess the intrinsic value of gold, which currently looks well overvalued versus our fair-value model using drivers such as real interest rates, the US dollar and central bank balance sheet expansion.

Top three drivers for the gold price in 2023: The Fed interest rate cycle and in particular the timing of its pivot, Central buying as a diversification away from the US dollar, improving political relations leading to a higher risk tolerance.

The wariness over crypto-currencies could persist well into 2023, supporting strong retail demand for silver, after a number of years of losing market share. China’s opening-up and the continuing strong demand from solar build-out as the world seeks energy security could also drive industrial demand for silver. The metal won’t be able to escape gold’s gradual decline over the course of the year, in our view, but could re-rate maintaining a silver to gold ratio well below 80 for most of the year.