Gold and Silver both closed 2022 in positive territory after spending most of the year in the red. Their recovery is due to the dollar’s sharp decline since October, falling almost 10% in the fourth quarter. That pushed silver up nearly 5% for the year and gold up fractionally. In the same period, stocks fell sharply, with the S&P 500 down almost 20%, the Dow down almost 9% and the tech-heavy NASDAQ down a huge 33%.
Year-End Summary: Precious Metals Rally to “Victory” in the Fourth Quarter
Just like a football or basketball game where the favorite team lags for three quarters only to rally for a win, gold and silver rallied in the fourth quarter to take the lead and win the game at the buzzer. For the full year, the U.S. Dollar Index (DXY) gained 8%, but it was up over 16% through September 30. At one point it was up 26% in a 16.5-month surge from May 24, 2021, to October 10, 2022. Since then, however, the dollar index dropped almost 10 points from 113.3 to 103.5, pushing gold and silver to positive gains.
The only plus signs were in the U.S. dollar and three of four precious metals, which also means gold and silver were up in double digits in 2022 in many other currencies. For instance, gold would be up about 11% in the British pound (and the Japanese yen), and silver would be up about 4% more since the dollar disguised the strength of the precious metals in other currencies.
CNBC Panel Debates $4,000 Gold in 2023
We’ve already reported how Ole Hanson of Denmark’s Saxo Bank sees $3,000 gold next year, with a potential surge to $4,000. Last week, a CNBC panel held on December 22 debated the fate of gold next year. One panelist, Juerg Kiener, managing director and chief investment officer of Swiss Asia Capital, said gold could surge to $4,000 next year as interest rate hikes and recession fears keep markets volatile.
On CNBC’s Asia-based program, “Street Signs Asia,” Kiener predicted gold would reach a range of between $2,500 and $4,000 next year. He said gold’s move “is not going to be just 10% or 20%,” but a move that will “really make new highs.” He said recessions in the first quarter in many nations will cause a slowdown in rate increases, which will make gold more attractive, especially for central bank buying.
Kiener pointed out that central banks bought 400 metric tons of gold last quarter, almost doubling the 241 tons they bought in the third quarter of 2018. He also pointed out, as we have, that, “Since [the] 2000s, the average return [on] gold in any currency is somewhere between 8% and 10% a year. You haven’t achieved that in the bond market. You have not achieved that in the equity market.” He added, “Gold is a very good inflation hedge, a great catch during stagflation and a great add onto a portfolio.”
A second panelist, Kenny Polcari, senior market strategist at Slatestone Wealth, said “I don’t have a $4,000 price target on it, although I’d love to see it go there.” He said gold’s price would be determined by how inflation responds to interest rate hikes, but added, “I like gold. I’ve always liked gold,” advising investors: “Gold should be a part of your portfolio. I think it is going to do better.”
A third panelist, Nikhil Kamath, co-founder of India’s largest brokerage, Zerodha, said investors should allocate 10% to 20% of their portfolio to gold as a “relevant strategy” going into 2023. “Gold also traditionally has been inversely proportional to inflation, and it has been a good hedge against inflation,” adding that, “If you look at how much gold you require to buy a mean home in the 70s, you probably require the same or lesser amount of gold today than you did back in the 70s, or the 80s, or the 90s.”
We haven’t seen this number of mainstream analysts predict significantly higher gold prices since the start of 2020, which was the last time gold surged to an all-time high of $2,089 on August 6, 2020. I don’t know if gold will reach the $4,000 mark but I agree with the other experts that we should see a significant increase in the price of gold in 2023.
My conservative estimate would put it between $2,500 an ounce and just over $3,000 an ounce but it wouldn’t hurt my feelings to see it even higher, so now is the time to buy gold and silver.