Julia Du

Bullion was pressured in 2022 by the Fed’s interest rate hikes which supported the US dollar and bond yields. We believe global central banks’ monetary tightening will remain the major headwind for gold prices in the first quarter of 2023. However, cooler-than-expected US inflation and a less hawkish Fed will then offer some relief to gold; a mild recession and sustained geopolitical tensions should also boost gold demand as a risk hedge. The precious metal may find ongoing support from some central banks’ buying. As China makes a landmark shift away from its Zero-COVID policy and relaxes most of its internal restrictions, strong economic growth from Q2 2023 should boost consumer gold demand. Therefore, gold is expected to edge higher and trade at an average of $1,850/oz in 2023. Gold will peak at the $2,000/oz level if the Fed starts to cut rates by the end of 2023.

Silver is highly sensitive to investor demand and manufacturing activity, both of which slowed as 2022 progressed. We expect silver to follow gold’s price movement and push higher in 2023. Demand is set to improve as China’s recovery from COVID-19 will boost manufacturing activity and increase industrial output from Q2 2023. Silver consumption from the green energy transition such as solar photovoltaic usage and 5G mobile technologies is also growing. On the other hand, further gains in silver prices will be capped by global central banks’ monetary tightening, which could lead to economic recessions in the US and Europe, and weigh on investment appetite for silver.

We expect platinum to have a better performance in 2023 due to stronger demand from the auto industry on the prospect of a full reopening in China. The growth in auto production will lead to higher platinum demand in catalytic converters, and the increasing substitution of palladium for platinum will also support growth in demand. Market sentiment will also improve as investors believe the US inflation has peaked and the Fed will slow its rate hiking cycle. On the supply side, platinum mine output will remain constrained in 2023 due to power outages and maintenance at mines in South Africa. The global platinum market will shift to a deficit this year. Therefore, we expect to see falling inventories and higher inflows into platinum ETFs, which will pull the price higher.

Palladium demand is expected to contract in 2023 due to the higher substitution of palladium for platinum in gasoline autocatalysts and the growing market share of battery electric vehicles. Russia’s palladium supply remains at risk and Norilsk Nickel may not achieve its 2023 production targets as the company continues to search for new suppliers of high-performance mining equipment and spares. The outlook is full of uncertainties, but overall the price is expected to move broadly sideways in 2023, with any significant palladium supply disruptions from Russia potentially leading to a surge in price.