Market Speaks: Interplay Between Inflation And Central-bank Intervention Will Determine Golds Performance In 2023

8 Dec 2022 , 02:19 PM

The World Gold Council (WGC) noted in its Gold Outlook 2023 that the global economy is at an inflection point after being hit by various shocks over the past year. The biggest was induced by central banks as they stepped up their aggressive fight against inflation. Going forward, this interplay between inflation and central-bank intervention will be key in determining the outlook for 2023 and gold’s performance. Economic consensus calls for weaker global growth akin to a short, possibly localised recession; falling – yet elevated – inflation; and the end of rate hikes in most developed markets. WGC noted that gold’s return in the environment consensus expects in 2023 is likely to be stable but positive, as it faces competing crosswinds from its drivers. But there are plenty of signals that the economy may not follow a well-telegraphed path. With the impact of the monetary shock still rippling through the global economy, any forecasts for 2023 are subject to more uncertainty than usual. All things considered, the dollar is likely to be pressured particularly as falling inflation and slower growth take hold. And a dollar peak has historically been good for gold, yielding positive gold returns 80% of the time (+14% on average, +16% median) 12 months after the peak.
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