Investors had mixed reaction towards gold in 2022. The year had witnessed crosscurrents of rising rates and a strong dollar, versus high inflation and increased macro uncertainty, which only presented both a bearish and bullish outlook towards the metal respectively.
Australia is the world’s second-largest gold producer behind China, which is not only world’s largest gold producer but also the largest consumer and has significant potential to drive the gold demand.
Gold which had crossed $2000 mark in March last year, later retreated and remained stagnant till October end. But come 2023, gold is continuing its march ahead. Gold prices have been on a general inclined path since the beginning of November as market turbulence, rising recession expectations and more gold purchases from central banks boosted demand.
The U.S. central bank had hiked rates by 75 bps four times last year, before relaxing to a 50-bp increase in December. Analysts now are mostly pricing in a 25-basis point rate hike in February leaving anticipation of a more bullish view on gold prices.
2023 outlook for global markets depends on the course monetary policy takes as central banks ease off the aggressive interest rate hikes of the past year. The US Fed is forecast to pause on interest rate hikes from mid-2023 and may even start reducing by Q4 2023.
Central banks globally, particularly in China, Turkey and India, have been buying gold at record rate. Although going on for the past many years, it seems to have been accelerated. The aim behind increasing their gold reserves is to diversify their foreign currency holdings thus reducing reliance on USD.
While strong physical demand influences the gold prices, the proportion of gold holdings in comparison to overall assets held by institutional investors being low augments it.
Reducing inflation, pause in interest rate hikes, the weakening dollar, along with China's reopening are leading to an expectation of upside momentum in Gold prices ahead with several analysts projecting even record highs for the precious metal in 2023.
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