Gold price movements in 2022 were largely shaped by the strength of the US dollar and overall health of the global economy. In the coming year, the latter will remain a crucial driver for the precious metal. In particular, heightened concerns over the probability of a recession may boost the metal’s value to a fresh all-time high as the year unfolds.
Gold price outlook in 2022
Gold price has had a rather wild year in 2022 as major drivers shaped the market. Following Russia’s invasion of Ukraine, the precious metal rallied to $2,070 per ounce. Notably, this was less than $5 below the all-time high of $2,074.88 it hit at the peak of COVID-19 in August 2020.
However, an ultra-hawkish Federal Reserve yielded a decline of 22% to $1,615 in late September. This follows the central bank’s aggressive move to deal with the persistently high inflation. Between March and December, the bank hiked rates by a total of 425 basis points; a record rate increase cycle.
The subsequent surge in Treasury yields and strengthening of the US dollar weighed on gold price for the better part of the year. Besides, strict COVID-19 restrictions in China contributed to the decline in jewellery demand seeing that the Asian country is a major consumer of precious metals.
Gold price 2023 forecast
As we approach 2023, investors are hopeful that a global stagflation will boost gold price. The economic slowdown, coupled with the loosening of the monetary policy by the US and other major central banks may yield a rally to the psychological level of $2,000. It is important to note that the precious metal has not reached that level since 10th March 2022. China’s reopening would also be beneficial to the commodity.
Notably, the aforementioned level reflects the best case scenario. However, it is also possible that the Federal Reserve will maintain a hawkish stance despite heightened recession concerns. If that was to happen, the environment of high interest rates may continue to support the US dollar while weighing on gold price.
Nonetheless, an actual recession would lower the impact of high interest rates on the precious metal. Subsequently, it may still record significant gains as the bulls strive to reach a fresh all-time high of 2,075.