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Gold price is on a steady rise, and analysts opine it could further benefit from a string of 2023 fiscal policies.
In the early hours of Tuesday, spot gold peaked just shy of $1,850 per troy ounce. However, the precious metal eventually eased off to trade at $1,834 per ounce late morning in Europe. Meanwhile, US gold futures were trading up 0.72% at $1,839.40 by 6 am Eastern Time.
Gold on Incline Since Early November 2022
Gold prices have been on a generally upward trajectory since the beginning of November. A combination of macro and microeconomic factors has fueled this rally. They include market turbulence, increasing recession expectations, and a rise in gold purchases from central banks. Echoing analyst projections that gold price will attain record highs in 2023, Ole Hansen, head of the commodity strategy at Saxo Bank, offered:
“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.”
Furthermore, Hansen also pointed out that last year’s global de-dollarization could further spur the precious metal to new heights. As he put it:
“The de-dollarization seen by several central banks last year when a record amount of gold was bought look set to continue, thereby providing a soft floor under the market.”
However, Hansen also suggested that upcoming US data could influence gold price key events for future forecasts. These include Wednesday’s latest Fed Reserve meeting minutes and Friday’s jobs report. According to Hansen, “above $1842, the 50% [mark] of the 2022 correction, gold will be looking for resistance at $1850 and $1878 next.”
Last month, Eric Strand, manager of the AuAg ESG Gold Mining ETF, also suggested that a more dovish fiscal stance could aid gold prices. According to him, at the time, 2023 could yield a new record high for gold. In addition, Strand stated that this year could witness the beginning of a new bull market. In his opinion, the price of gold could surpass $2,100 per ounce.
Projected Record Gold Price Contingent on Fiscal Policy Trajectory
The likelihood that the price of gold will crest at a new all-time high in 2023 largely depends on the monetary policy trajectory. These fiscal decisions are crucial because they come when central banks look to ease off the aggressive interest rate hikes of 2022. Due to inflation, the governing banks of developed nations, including the US and the Eurozone, embarked on steep rate hikes last year. However, their relentless drive to rein in inflation stifled economic growth and threatened to bring about a recession.
Many economic discussions center around whether a looming recession could result in prevalent rate cuts by the end of 2023. As it stands, the consensus is that inflation will far exceed the target range in most developed economies.