Even as analysts expect short-term downsides for gold prices due to the US Federal Reserve's monetary tightening, some believe that gold prices will soar next year.
According to Denmark's Saxo Bank, gold will jump to $3,000 an ounce driven by the markets' conviction that inflation will continue to remain high for the foreseeable future. Gold was trading around $1,778 an ounce on Monday. If the prediction by Saxo comes true, gold prices will jump nearly 70 percent in 2023.
"Fed policy tightening and quantitative tightening drives a new snag in US Treasury markets that forces new sneaky 'measures' to contain Treasury market volatility that really amounts to new de facto quantitative easing," Saxo said, according to Yahoo Finance.
Commodities Will Surge
The Saxo analysts further stated that gold's upward momentum will also be aided by China's possible ditching of its zero-Covid policy. The global economic sentiment remained dull largely owing to continued Chinese Covid-19 curbs even as much of the world has been fully open for more than a year. If China also remove restrictions, gold and commodities will end up going sharply higher. "Under-owned gold rips higher on the sea-change reset in forward real interest rate implications of this new backdrop," the bank said.
Among the other 'Outrageous Predictions' for 2023, Saxo says that global central banks will stumble on their inflation mandates and the Federal Reserve will keep pushing on with aggressive rate hikes. Dollar will rise further and the Japanese yen will become weaker, Saxo says.
"This year's Outrageous Predictions argue that any belief in a return to the disinflationary pre-pandemic dynamic is impossible because we have entered into a global war economy, with every major power across the world now scrambling to shore up their national security on all fronts; whether in an actual military sense, or due to profound supply-chain, energy and even financial insecurities that have been laid bare by the pandemic experience and Russia's invasion of Ukraine," Steen Jakobsen, chief investment officer at Saxo, said.
Meanwhile, ING's commodities strategist Ewa Manthey said the current gold rally will fizzle out as the US central bank raises rates further. However, things will shift for the precious metal in the next year. "While in the short term we see more downside for gold prices amid monetary tightening, any hints from the Fed of an easing in its aggressive hiking cycle should start to provide support to prices. For this to happen, we would likely need to see signs of a significant decline in inflation," Manthey said, according to Kitco News.