Gold 2023 Outlook: Recession and Rates to Remain in Focus

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  • Key considerations for gold in 2023 remain the path of global monetary policy and risk of global economic recession
  • Gold may see strength in 2023 driven by a pause in monetary policy tightening, a weaker US dollar, and continued volatility from global uncertainty
  • Gold demand globally remains robust which may support a brighter outlook in 2023

Gold’s performance throughout 2022 could be summarized simply as “surprising.” For some investors, gold was surprising as it did not live up to performance expectations despite several supportive catalysts for the price, including: rising equity market volatility as indices broadly entered a bear market; the Russian invasion of Ukraine raising the specter of long-lasting geopolitical turmoil in Europe; and multi-decade-high inflation weighing on the global growth outlook.

Conversely, other investors found gold surprising in its endurance to portfolios and how well gold held up in the face of the Federal Reserve (Fed) aggressively increasing interest rates, rising real yields, the US dollar hitting a 20-year high,1 and sporadic lockdowns in China impacting gold demand.

In our view, the truth is somewhere in the middle since, on a relative basis, gold did quite well throughout 2022 (see Figure 1). Gold outperformed global stocks and bonds, and provided portfolio diversification while also testing its all-time-high price in US dollars after reaching US$2070/oz in early March.2

Figure 1: Gold’s Relative Outperformance May Shine Throughout 2023 With Overhang of Global Uncertainty

These conflicting perspectives may persist into 2023. The biggest headwind that still remains is the path of Fed rate tightening, particularly in the first half of 2023. Stronger tailwinds may emerge in the latter half of 2023 as gold aims to resume its long-term upward trend. Overall, the outlook for gold next year may be buoyed by:

  • a potential pause or even pivot in the Fed’s monetary policy against growing recession risks
  • waning US dollar strength as other global currencies experience mean reversion
  • total global demand for gold maintaining current levels
  • greater economic uncertainty and ongoing geopolitical turmoil driving market volatility and demand for downside protection among investors

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