A Respected Analyst Is Calling For $3,000 Gold Next Year. I Believe It Could Hit $4,000

Will 2023 be the year that gold hits $3,000 an ounce?

Ole Hansen, respected commodity strategist at Denmark’s Saxo Bank, says it’s possible once markets realize that global inflation will remain hot despite monetary tightening. I believe, as I’ve said before, that gold could climb as high as $4,000.

Hansen notes three other factors that could help push the metal to new record highs next year. One, an increasing “war economy mentality” could discourage central banks from holding foreign exchange reserves in the name of self-reliance, which would favor gold. Two, governments will continue to drive up deficit spending on ambitious projects such as the energy transition. And three, a potential global recession in 2023 would prompt central banks to open the liquidity spouts.

The analyst has already said that his comments are less of a forecast and more of a thought experiment, but I don’t think investors should brush him aside so easily. I believe it’s very possible that we could see $3,000 gold—or higher—in the next 12 to 18 months, for all the reasons he mentioned.

Central Banks On A Gold Buying Spree

Hansen is correct in bringing up central banks’ increasing appetite for gold as a reserve asset. Central bankers and finance ministers may be all about fiat currency, but behind the scenes, they’re gobbling up the yellow metal at the fastest rates in living memory. In the third quarter, official net gold purchases were approximately 400 tonnes, around $20 billion, the most in over a half-century.

central banks have been net buyers of gold

Turkey was the biggest gold buyer in the third quarter, followed by Uzbekistan and India.

This week, China’s central bank disclosed it purchased gold for the first time since 2019. The Asian country said it recently added 32 tonnes, or $1.8 billion, bringing its total to 1,980 tonnes.

Despite being the sixth largest holder of gold, not counting the International Monetary Fund (IMF), China still has a long way to go if it wants to diversify away from the U.S. dollar in a meaningful way. The metal represents only 3.2% of its total reserves, according to World Gold Council (WGC) data. Compare that to 65.9% of reserves in the U.S., the world’s largest holder with more than 8,133 tonnes.

This is very bullish, and I predict we’ll be seeing a lot more buying from China in the coming months.