StoneX predicts that the precious sector will perform well in 2023, with gold and silver forecast to increase by approximately 14% and platinum to see the largest gains by the end of the year.
Despite some recent profit-taking, the set-up for gold is very much a bullish one, said StoneX analyst Rhona O’Connell during a webinar. The U.S. dollar outlook, geopolitical tensions, stagflationary worries, and a sudden surge in central bank gold buying will boost prices to record highs in many currencies, including the U.S. dollar.
According to StoneX analyst Rhona O’Connell, the end of 2023 target price for gold is $2,070 per ounce, which represents a 14.2% increase. While this would be a new high in terms of US dollars, it wouldn’t be considered a real-terms record. O’Connell specified that nominal record highs in dollars and other major currencies are feasible, but considering inflation as measured by the US Consumer Price Index, a $2,075 price target would still be 34% lower than the January 1980 level. Historically, real gold prices have risen during times of inflationary threat, however, this is not the current case as monetary policy is the dominant factor.
According to Rhona O’Connell from StoneX, the key factor driving the surge in gold is the unwinding of the long U.S. dollar trade. The surplus liquidity in the system is seeking new investments, and professional investors are positioning themselves in the gold market in anticipation of the Federal Reserve’s policy shift. There has also been a noticeable shift in the managed money positioning by the CFTC. Investors are seeking to get ahead of the game by moving into gold.
According to Rhona O’Connell of StoneX, the increase in gold prices is due to various factors, including the unwinding of the long U.S. dollar trade, geopolitical tensions, and global uncertainty. These factors are causing more players, especially central banks, to seek safety in gold as a way to diversify and mitigate risk. The World Gold Council also cites gold’s role in a crisis as another reason for central banks to hold it.
According to StoneX analyst Rhona O’Connell, central banks are conveying a message through their actions, and gold plays a significant role in it. This was highlighted by a recent report from the World Gold Council, which showed that central banks have bought a record 1,136 tonnes of gold since 1967. O’Connell noted that these purchases indicate that central banks are wary of the risks in the global economy.
Silver to Mirror the Trend of Gold Prices?
According to O’Connell, silver prices are expected to mirror the trend of gold prices, rather than those of copper. She predicts that silver will see growth this year, but with its typical volatility and the likelihood of quick profit-taking by professional investors. The year-end target for silver set by StoneX is $27.25, with a 13.8% increase. O’Connell attributes the recent revival of silver to growing demand in India, which has almost made up for the shortfall in imports from 2020 and 2021.
Platinum Outperforming Others
According to O’Connell, the platinum market is moving into a shortage, and prices are projected to rise 16.4%, with a year-end target of $1,240 per ounce. She states that the base-case scenario is for global mine production to remain stable in 2023, but there is a risk of decline, particularly from South Africa. On the other hand, demand is looking positive as the global automotive industry bounces back. Additionally, the potential for platinum to replace palladium in the automobile industry may make it the top-performing precious metal in 2023.
State of Palladium is Doubtful
According to O’Connell, palladium is not expected to regain popularity. StoneX projects a year-end price target of $1,830 per ounce, a 2.3% increase. Despite a small deficit predicted for this year, equivalent to roughly three weeks of global demand, the overall outlook for the metal remains bleak in the long term due to the shift towards electric vehicles. O’Connell notes that if their projections for the global automobile industry are correct, the number of internal combustion engine cars being scrapped will exceed the number entering the market by 2032-2033.
The precious metal sector is expected to have a positive year in 2023, with gold and silver projected to see a 14% increase and platinum to see the highest returns, according to StoneX. The bullish outlook for gold is driven by a combination of factors such as the U.S. dollar outlook, geopolitical tensions, stagflationary worries, and an increase in central bank gold purchases. The unwinding of the long U.S. dollar trade and investor demand for gold in light of global uncertainty are also contributing factors. StoneX’s year-end target for gold is $2,070 an ounce, for silver $27.25 an ounce, and for platinum $1,240 an ounce. The performance of palladium is seen as questionable, with a year-end price target of $1,830 an ounce, and a small deficit expected in the year.