René Hochreiter

The gold price is likely to rise in early 2023 as investors anticipate the US dollar weakening in tandem with a rates decline in support of the US economy in the recession anticipated this year. The USD Index (DXY), a good benchmark for the value of the US dollar, has formed a death cross which may likely see a weakening of the US dollar. The index is currently at 102 and strong technical support is at 95. This could mean a 9% weakening of the US dollar in 2023, with a commensurate rise of the gold price. The gold price currently seems to be most influenced by the level of the US dollar, but the VIX is low, inflation is falling and the copper price is rising, all of which could be negative for the gold price.

Top three drivers for the gold price in 2023: the strength of the US dollar, global inflation, global volatility

As a precious metal, silver trades mostly in line with gold. The market is in a deficit for the first time in many years, possibly due to good demand for industrial metals and lower LBMA stocks, which are at their lowest in seven years. Possibly photovoltaic (PV) cell demand as high hydrocarbon energy prices encourages substitution by solar energy and a switch to net long positions, a record turnaround of 180 Moz in the last three months could be responsible for this, especially as China is by far the biggest supplier of solar panels worldwide. We think that solar panel demand could double this year, consuming a possible 25% of total silver demand.

Platinum stock building by the Chinese in anticipation of its use in the hydrogen economy has seen 2.4 Moz of excess demand being purchased by China over the last two years. This has seen 4.6 Moz of above-ground stocks depleted to 2.2 Moz. If this level of purchases continues in 2023, and as South Africa is likely to supply 10% less metal this year, large deficits in the next two years could wipe out these stocks. With maintained good demand from other sectors, the price is likely to perform well in 2023, with the possibility that it may once again trade at a premium over palladium in the not-too-distant future. The platinum price is influenced by the gold price through its link to it as a precious metal, and with our neutral outlook for gold, this could temper the rise in platinum prices until stocks are depleted circa 2024.

The palladium price is expected to soften this year as stocks have continued to build, with substitution by platinum being in evidence. Platinum’s properties are similar to palladium’s in gasoline autocatalysts and the metal has been less than half the price of palladium for several years. Russian supply has been at normal levels, effectively causing an oversupply. With lower demand in 2022 due to supply chain issues, stocks have built up, despite cutbacks from South African suppliers. Palladium has no role to play in the approaching hydrogen economy and relies mainly on gasoline car demand, which we think will remain strong in the longer term because electric vehicles cannot replace internal combustion engines in the next 50 years due to insurmountable battery materials shortages.