The approaching economic recession of the developed countries of the world and the associated high rate of inflation have, according to analysts, forced investors to return to the traditional investment instrument – gold. Investment gold – traded on the global commodity markets – thus broke out of its full-year loss from last year and in the first trading week of 2023 already slightly appreciated.
On the European morning of Wednesday of 4 January 2023, there was a price increase of 1.28% over the last 52 weeks. However, the fact remains that the total annual appreciation also includes a growth of 1.21% of the price, which was only achieved in the first days of this week at the beginning of this year. At the day mentioned, at 6:14 am CET thegold traded on the Commodities Exchange Centre (COMEX) commodity market at US$ 1,852.50 per troy ounce with a daily increase of +0.35% so far. Meanwhile the exchange value of the US dollar (USD) has fallen slightly on a global scale, when according to the US Dollar Currency Index (DXY), we saw the USD at a price level of 104.47 with a daily decrease of -0.04%.
Generally gold prices have shown their price decline since the beginning of November 2022, when turbulence, especially on the stock market, gave the impression of a seemingly quick profit, so the demand for gold decreased and with it its price. However, the growing expectation of a recession, the still persistent high rate of inflation and further purchases of gold by central banks into their reserves subsequently very strongly and quickly, brought gold back into game. Demand for gold increased at the end of 2022 and especially at the very beginning of 2023, which, according to analysts, brought the price of gold to its maximum in the last six months. “In general, we are looking for a price friendly 2023 supported by recession and stock market valuation risks — an eventual peak in central bank rates combined with the prospect of a weaker dollar and inflation not returning to the expected sub-3% level by year-end – all adding support,” said Ole Hansen, Head of Commodity strategy at Saxo Bank.
Looking ahead, Mr. Hansen said the key events that can affect gold price will be Wednesday’s minutes from the last US central bank meeting – the Federal Reserve System (FED) minutes published on 4 January in the evening European hours and Friday 6 January the US employment report, released shortly after European noon. Much of the outlook for global markets in 2023 depends on monetary policy, as central banks scale back last year’s aggressive rate hikes amid slowing economic growth and possible recessions. But economists are divided on whether this will culminate in a rate cut by the end of the year, as inflation is expected to remain well above the target range in most major economies. Complete dovish behavior by central banks this year would likely have major implications for gold prices, according to financial strategists.