Inflation remains a positive for gold in 2023, banks buying
Saxo Bank, along with Bank of America, is one of the most optimistic on gold in the new year. Ole Hansen, head of commodity strategy at the Danish Bank, said that he doesn’t expect the Federal Reserve to bring inflation under control.
“The risk of a recession and the FOMC hiking into economic weakness – potentially without succeeding in getting inflation under control – continues to strengthen the upside risk for investment metals in 2023,” he said.
Although inflation is expected to be down from the 2022 highs, it is still likely to remain elevated through 2023.
The Federal Reserve sees core inflation rising 3.5% in 2023, which is relatively in line with consensus estimates ranging between 3% and 4%.
In its preliminary estimate, the University of Michigan reported that consumers see inflation rising 4.6% next year.
Pre-COVID-19 inflation was well below 2%. In 2020, inflation in the U.S. rose 1.23%.
Analysts have said that an optimistic scenario for gold would be if the Federal Reserve and other central banks raise their inflation target.
Although investment demand was lackluster through 2022, the precious metal saw historic demand from central banks.
As of the end of the third quarter, central banks bought 673 tonnes of gold, the most since 1967. At the start of December, China, for the first time in three years, reported that it bought 32 tonnes of gold in November.
Juan Carlos Artigas, global head of research at the World Gold Council, said in a recent interview with Kitco News that although this year’s purchases have been extremely elevated, it’s a continuation of a trend that’s been building for more than a decade.
