As we enter the fourth month of 2023 amidst economic uncertainty in the United States, investors are looking ahead, and many experts are making their gold price predictions.
The years 2020 and 2021 were challenging for consumers due to the pandemic and government-enforced lockdowns, severely impacting their spending ability. In 2022, the economy showed signs of recovery, but the lingering effects of the pandemic and the costs of keeping the economy afloat started to impact the nation’s economic progress.
Soaring high prices pushed inflation further up while average incomes remained stagnant, adversely affecting Americans. Additionally, the Federal Reserve System’s slow response to rising inflation, with experts suggesting it was temporary, further strained the economy.
In this article, I will go over the factors that could affect the gold forecast (2023) and discuss what experts believe the gold price will be in 2023.
As always, it is essential to note that forecasts are just predictions, and nobody knows the exact price of gold or how it will fluctuate in the coming months or years.
What Are the Factors that Affect Gold Prices?
To forecast the gold price in 2023, it is crucial to understand the factors that affect gold prices, including the following.
US Dollar Trend
When the US dollar remains strong, or the US dollar index increases, it is an indication for me as an investor to have confidence in the USD. In such cases, I am more likely to invest my money in the dollar and wait for better investment opportunities.
However, if the USD starts to decline, it is a sign for me to withdraw my money and invest in something more stable, such as gold. In such situations, the demand for gold increases, which can drive its price.
When the Federal Reserve (FED) increases interest rates to curb inflation, borrowing becomes more expensive, and people tend to spend less money. To protect my money against inflation, I, like many other investors, turn to safe assets like gold, which can increase its demand and price.
Wars and Uncertainty
As an investor, I closely monitor global economic uncertainty, especially when there is a high probability of war between countries. In times like this, I prefer investing in gold and other safe havens to protect my money.
Demand for Gold Jewelry
Demand for gold jewelry is a significant driver of gold prices, especially in countries with a cultural affinity towards gold jewelry, such as India and China. When there is an increase in demand for gold jewelry, it creates upward pressure on the price of gold.
However, it’s important to note that the impact of demand for gold jewelry on gold prices is often short-term and localized to certain countries or regions.
Supply and Demand of Gold
Another factor that plays a role in the price of gold is the market forces of supply and demand. If the supply of gold increases, such as when mining companies increase their production capacity, it can lead to a decrease in the price of gold.
The investment demand for gold can also push the price of gold upwards if the supply of gold remains stable.
Relationship between Gold and Oil Prices
There is a strong link between the price of gold and oil. When oil prices rise, the price of gold also increases.
For example, consider the current situation where the top oil-producing companies, Saudi Arabia and Russia, are colluding and controlling the oil supply, leading to an increase in oil prices.
While this benefits these oil-producing countries, it can have a negative impact on other countries in the form of inflation. During times of inflation, the demand for gold tends to rise, leading to an increase in the price of gold, suggesting that the two have a strong positive correlation.
2022 – 2023 Trends: Current State of the Gold Market
According to the World Gold Council, 2022 was the strongest year for gold demand in over a decade. As Russia invaded Ukraine in February 2023, the demand for gold amidst geopolitical tensions rose, causing gold to reach nearly $2,000 per ounce.
However, the rising trend saw a reverse due to the rising US dollar and sudden hikes in interest rates by the Fed, and the precious metal plummeted by 20% in September 2022.
Overall, the annual demand for gold jumped by 18%, and the gold price closed with a marginal gain despite the strengthening of the US dollar and rising global interest rates.
The strong demand for gold in countries such as Turkey, Europe, and the Middle East offset the decline in demand for gold in China, where the Covid-19 effects adversely affected the demand for the precious metal.
As 2023 began, gold saw another trend reversal, and the gold price started to increase again. The two factors that contributed to the trend reversal were the opening of China’s economy and the strong demand for jewelry.
In February 2023, gold slumped moderately but soon picked up the pace, crossing the $2,000 per ounce mark. The uncertainty in the banking sector following the collapse of Silicon Valley Bank forced investors to seek safe-haven assets, such as gold, causing a rise in demand and pushing its price upwards.
Gold Hit an Intraday High Amidst Banking Crisis
After the 2008 financial crisis, the collapse of Silicon Valley Bank was the most prominent banking failure in the country. The struggling bank had billions of dollars invested in bonds that lost value due to the interest rate hikes.
These were long-term US government bonds that lost their value, and to make matters worse, concerning news reports about the shaky financial situation of Silicon Valley Bank forced customers to make withdrawals.
The bank did not have enough cash to cover customer withdrawals, and they had to liquidate their bonds, which further impacted the bank’s financial position, resulting in billions of dollars in losses.
It didn’t get any better when Credit Suisse acknowledged material weakness with SEC letters showing months-long reporting errors. A material weakness is a serious control failure that further plummeted investor confidence in banking stocks.
To restore investor confidence, central banks, including the US Federal Reserve and the European Central Bank, decided to inject USD liquidity into the financial markets, similar to the steps taken after the 2008 financial crisis.
Gold Price 2023: Factors Affecting Gold Prices in 2023
Besides the banking crisis, there are several factors affecting the gold price (2023), some of which include the following.
US Fed Monetary Policy
The persistently high inflation and aggressive rate hikes by the US Federal Reserve are driving the gold market narrative. In 2022, the US Central Bank raised interest rates six times, with the interest rate standing at 4.5% at the end of 2022. At the start of 2023, the US Central Bank announced it would ease interest rates to 25 basis points, bringing it to 4.75%.
In a recent meeting, there were hints at increasing the interest rate to 5%, which tells me that gold may go up in the coming weeks or months, affecting the gold forecast (2023).
US Dollar Pulls Back by 10%
Although the dollar index was at an all-time high in 2022, it fell by 10% in March 2023. The easing of interest rates by the central banks and the declining dollar indicates trouble for the banking system but a positive outlook for gold as people move towards precious metals during economic uncertainty. I believe that a weak dollar in the coming months could affect the gold forecast (2023).
Besides Russia’s ongoing invasion of Ukraine since February 2022, there is a fear that China might take similar actions regarding Taiwan, a close ally of the US.
Any incidents between China and Taiwan could prompt the USA to step in, further affecting the geopolitical situation. In my opinion, these actions may have an impact on the gold price in 2023.
Gold Forecast 2023: Should You Expect a Secular Bull Market?
As of June 15, 2023, the US gold futures stand at $2,017.70. ANZ research updated their gold price forecast, citing an easing interest rate and a weaker US dollar.
The banking group forecasts that the gold price (2023) will remain at $2,000 but move to $2,075 per ounce by late 2024. However, the group stated that there might be some fluctuations in the gold price (2023) depending on current events at the time.
Although ANZ research predicts gold to reach $2,075 by late 2024, analysts surveyed by Reuters are less optimistic about the outlook of gold, suggesting that its price could average at $1,890 in 2024.
By the end of the current trading quarter, TradingEconomics expects the gold price to hit $1,844. In 12 months’ time, the website’s macro models and analysts expect the price of gold to fall to $1,779.
Despite the forecast variation, most predictions suggest a price range similar to 2022. Many analysts point to the dollar’s strength as a key factor driving gold prices in 2023, expecting the dollar to remain strong or rise in the first half of 2023 before slowing growth.
The anticipated weakening of the dollar might push gold prices higher in the latter part of the year. However, only time and events will determine how much gold prices rise or fall in 2023.
Disclaimer: Any information provided is to keep you informed about gold trends, factors affecting gold prices, and the gold price prediction (2023). You must understand that this article does not provide any investment advice. If you rely on the information on this page, you do so entirely at your own risk.