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Why Should You Invest in Gold in 2023?

Although 2022 wasn't the year for the precious yellow metal, it is worth saying that 2023 will set gold to shine again !

An old traditional safe-haven asset, gold has faced a challenging year during 2022, and that has increased competition from other investments that offered better yields. But, with several factors expected to drive up the price of gold, including central bank purchase, rising jewelry demand, and limited gold mine supply, it is safe to say that this is the time to consider investing in gold or miners.

To go through the reasons that will let you consider investing in gold in 2023,keep on reading the following lines !

So, the question is, "Should you Invest in Gold in 2023 "?

The U.S. Federal Reserve's plan to slow down the pace of interest rate hikes has caused a sharp decline in the dollar index, which benefits commodities. This trend is also seen in central banks buying more gold, indicating increased confidence in items, according to Iyer. However, A recent examination of the performance of various asset classes over the past three months suggests that investors should consider increasing their investment in precious metals, specifically gold and silver, due to rising prices.

On the other hand, Gold ETF has experienced a 9.75% increase, while silver ETF has seen a 22.55% average increase. ETFs, Exchange Traded Funds, have become famous for investing in precious metals. However, investors should consider multiple factors before making decisions, as precious metal performance can vary, and relying solely on past trends is not advisable.

First, let's look back at Gold Performance in 2022

Volatility was the slogan of the year 2022! The invasion of Ukraine by Russia in February 2022 and subsequent hikes in policy rates by central bankers worldwide led to persistent pressure on the prices of risky assets.

Chirag Mehta, the Chief Investment Officer at Quantum Mutual Fund, explains the situation. The rapid pace of tightening resulted in a flight of money from risky assets to the U.S. dollar as actual interest rates turned positive for the first time in two years in May 2022.

This caused a sell-off in gold, bringing prices down to an 18-month low of $1,614. However, as inflation moderated sequentially in Q4 2022 and investors anticipated a less aggressive Fed in 2023, the dollar came under pressure, helping gold prices to recover.

To delve more into the issue,lets look at the gold performance throught the years:

5 Gold Prices Boosters in 2023

There are several reasons why gold shall prevail in 2023. Here is a handful of them:

Central Banks Purchases

According to the World Gold Council, central banks have purchased 673 tons of gold year-to-date, surpassing all annual totals since 1967. In the Q3 of this year, global central banks bought almost 400 tons of gold, marking the highest demand from this sector in the WGC's records dating back to 2000.

This is also the eighth consecutive quarter of net purchases, resulting in a year-to-date total of nearly 700 tons, higher than any full-year total since 1967.In fact,Experts expect this trend to continue in 2023, potentially contributing to a rise in gold prices. Nicky Shiels, head of metals strategy at MKS PAMP, stated that as "deglobalization accelerates, non-G-10 nations are expected to 're-commoditize' and ramp up gold holdings.

Jewelry Demand

Gold jewelry demand was robust in Q3 2022, with 523 tons of consumption, according to the World Gold Council. The 10% YoY increase was seen despite the challenging global economic conditions. Over the past decade, the annual demand for gold jewelry has varied from 840 to 2,100 tons, averaging about 1,500 tons per year.

Owning gold is seen as a symbol of financial wisdom and good fortune. In China, the demand for gold jewelry is driven by cultural practices and the growing wealth of the middle class. As the Chinese economy recovers, demand for gold jewelry will likely continue to grow in the coming year.

Weakening U.S. Dollar

The relationship between the U.S. dollar and gold prices is inverse, meaning that when the value of the dollar drops, gold prices tend to increase. This trend is expected to continue in 2023, with the U.S. dollar expected to weaken in the latter half of the year. Analysts at Wells Fargo anticipate that the dollar will remain strong in early 2023 but will depreciate as the Federal Reserve ends its tightening cycle and the U.S. economy worsens.

There are also other potential factors that could drive the price of gold in 2023, including the escalating conflict in Ukraine. Russian President Putin's recent announcement that he will not end the war in Ukraine has raised concerns and fueled speculation of a possible resurgence in fighting in the spring of 2023. As the possibility of an escalating conflict creates uncertainty and instability in the global economy, many investors may seek safe-haven assets such as gold to protect their wealth.

A Quick Recap

Banks all over the world have been buying gold at an unprecedented rate, which could increase demand and drive-up prices. China has officially reported its first gold purchases in three years and is expected to grow its holdings further in 2023. With the complete reopening of the Chinese economy, demand for gold jewelry is also likely to rise. Geopolitical tensions and economic uncertainty could also lead investors to seek gold as a haven.

One of the possible predictions for gold prices is a 10% or more tremendous increase in gold prices in 2023, with gold-focused stocks performing even better due to their leverage. Other commodities, such as silver, copper, oil, and nickel, are expected to perform well in 2023.

If you're looking to invest in the gold and silver sector, The 9BullsFX broker is here to help. Our expert analysis of gold mining stocks and insights will give you all the information you need to make informed decisions.


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