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(Kitco News) – Although the gold market has seen lackluster demand for most of 2022, it will remain an important strategic asset as the new year will be filled with uncertainty, according to the World Gold Council forecast for 2023. .
In an interview with Kitco News, Juan Carlos Artigas, global head of research at the World Gold Council, said there was no clear consensus on what investors can expect in 2023. The tightening without Previous central bank monetary policy to calm inflation has pushed the global economy to an inflection point.
Artigas explained that while most economists expect central bank tightening to push the global economy into a mild recession, there are growing concerns that the world is headed for a deeper recession. The idea that the Federal Reserve could orchestrate a soft landing has all but been relegated to the realm of hopes and dreams.
Artigas said that in this environment, gold should show its value.
“Historically, crunch cycles have ended in a recession,” he said. “The deeper the recession, the better gold is.”
In its latest report, the WGC noted that gold has posted positive returns in five of the past seven recessions.
“A sharp slowdown in growth is enough for gold to do well, especially if inflation is also elevated or rising,” the analysts write in the report.
Besides the health of the global economy, WGC said another factor gold investors should pay attention to is the strength of the US dollar. As the Federal Reserve plans to end its tightening cycle by the first half of next year, there is a growing consensus that the US dollar has peaked.
“A dollar spike has always been good for gold, delivering positive gold returns 80% of the time (+14% average, +16% median) 12 months after the spike,” the analysts wrote. in the report.
While investment demand is expected to improve next year, Artigas warned investors that gold could still experience some volatility as interest rates are expected to remain high for most of 2023, the outlook of inflation being confusing at best.
Analysts have noted that if inflation drops and interest rates remain high, real rates could continue to rise, which is negative for gold prices.
“Overall, gold’s return to the environment consensus expects in 2023 is likely to be stable but positive as it faces crosswinds competing with its drivers. But there are many signals that the economy may not follow a well-telegraphed path,” the analysts said.
As for investors who avoided gold until 2022, Artigas said that was probably a mistake. As gold prices look to end the year around $1,800, the precious metal is in relatively neutral territory. At the same time, gold is one of the best performing assets this year, outperforming both bonds and equity markets.
“Given the headwinds we’ve seen this year, gold has held up very well,” he said. “Investors who had gold in their portfolio in 2022 would have seen better returns, fewer losses and less volatility. We expect this to continue to be the case in 2022.”
As for how much gold investors should have, Artigas said WGC research shows investors should have between 2% and 10% gold in their portfolio.
Disclaimer: The opinions expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. This is not a solicitation to trade commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no responsibility for loss and/or damage resulting from the use of this publication.
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