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What can we expect from the gold price in 2023?

Published by Tavex Analysts in category Economy on 25.01.2023
Gold price (XAU-GBP)
1,630.27 GBP/oz
+ GBP17.32
Silver price (XAG-GBP)
20.05 GBP/oz
+ GBP0.03

The gold market is expected to remain very volatile this year, allowing smart buyers to take advantage of good buying opportunities. The risk of recession, as well as lack of knowledge about the direction of interest rates and geopolitics, are creating uncertainty.

Last year was volatile and temperamental for the gold market, which after large fluctuations ended the year at essentially the same level as at the beginning of the year. This year is expected to be another year of large price swings, as the risk of recession is increasing, stagflation may be ahead, and the direction of interest rates is likely to become uncertain in the middle of the year.

Currency markets also remain volatile, and the sharp rise in the dollar has been followed by a sharp fall, leading to speculation that the time of the strong dollar may be over. In the big picture, two major factors will shape the gold market this year – the risk of a recession and the uncertainty over whether interest rates will continue to be raised throughout the year or whether they will start to fall, which will have a major impact on the dollar.

There is also a lot of uncertainty about geopolitical tensions, be it the war in Ukraine, the Middle East or the situation around Taiwan. As these are highly unpredictable factors, they will not be addressed in the following analysis.

What about interest rates and the dollar?

Inflation in the US has slowed in recent months and has been running at a slower pace than expected, economic data is cooling, and this means that the Federal Reserve is likely to slow its rate hikes considerably this year. This has been supportive for gold in recent months and is likely to help the price stay higher early this year.

In November, annual inflation was 7.1%, the fifth consecutive month of declines. US retail sales fell at the fastest pace in a year in November, reflecting the restraining effect of high inflation on demand. In addition, the industrial sector is also showing signs of cooling.

The Federal Reserve is encouraged by this data, as interest rate hikes are being used to try to bring down growth and thus inflation. The central bank expects US economic growth to be very low this year, and the risk of a recession (lasting at least two quarters) is high.

“The possibility of a recession is almost as great as avoiding one,”

the Federal Reserve said late last year. The risk of a recession in Europe is also considered very high.

While the Federal Reserve has been sharply raising interest rates since the middle of last year, the central bank is now looking to slow down its rate hikes soon and end them within a year. Since March last year, the base rate has been raised a total of eight times, to a range of 4.25-4.5%.

The central bank expects interest rates to peak at just over 5 percent this year. Monetary policymakers are not yet sure how long interest rates will remain at this level after the peak and whether they will be raised further or lowered. Higher interest rates will have a negative impact on gold prices.


Expectations of the pace of interest rate rises have come under pressure and this has caused the dollar to fall sharply after a long and rapid rise. This, in turn, has boosted gold prices in recent months. However, the impact is likely to be short-lived (a few months), as central banks are keen to push interest rates higher despite the slower pace. Higher interest rates combined with slowing inflation is an unfavorable combination for gold.

However, the future will also depend largely on what happens to currency movements and what happens to the economies. Will the dollar continue to rise after a short pause? The return of loose monetary policy is expected to cause all currencies to fall, which will support the gold price (even if the dollar strengthens against other currencies). A higher rise in gold prices is then expected in euros, pounds, and currencies other than the US dollar. Is a recession coming or not? There is a strong likelihood that we will see a recession this year and that this will force interest rates down again, which will have a negative impact on gold initially, but eventually a positive one.

A recession would be good for gold in the long term

This year, there is a reasonable chance that we will face a recession in both Europe and the US. In the short term, this could be depressive for the gold price, but in the medium term (around 6-24 months) very supportive.

The risk of a recession is high because of the rapid pace of interest rate rises and the recessions that have traditionally followed. The most important, and more accurate, indicator of a recession – the inversion of the yield curve – has already taken place. Since 1955, there have been a total of ten reversals of the yield curve in the US, nine of which have been followed by a recession within 6-24 months. On one occasion, in 1965, the economy did not start to fall, but growth slowed from 10 per cent to 0.2 per cent. Read more about the inversion of the yield curve here.

The price of gold has typically fallen at the start of a recession, as liquidity in financial markets has dried up and gold is one of the first assets to be sold to improve cash positions. Read more about the risk of a liquidity crisis here.

However, the extent of the resulting fall in gold prices depends on whether we enter a very deep crisis. For example, in the liquidity crises we saw in both 2008 and 2020, the price of gold fell sharply. However, this fall will be short-lived, as gold has generally risen rapidly in the aftermath of recessions. In the 2008 crisis, the fall was 30%, in 2020 it will be 15%. It took a year to recover to pre-crisis levels in the first case, but only a month and a half in the second.

Precious metals refiner Heraeus wrote in a report published this summer:

The economic downturn is not necessarily bad news for gold. Typically, precious metal prices have fallen during recessions, but gold has fallen less and recovered faster than other metals. In general, gold prices have traded higher at the end of a recession than at the beginning.


A recession would mean that inflation comes down temporarily and central banks are forced to return to looser monetary policy. As with the pandemic in 2020, the next recession is likely to be overreacted to, leading to a new inflationary wave later as the commodity super-cycle continues. This also potentially implies stagflation – an environment where inflation remains high, but the economy does not rise or falls. Gold should do very well in such an environment. Rather, a recession scenario is more likely this year than a so-called soft landing, where a crisis is avoided despite interest rate hikes.

What will happen to the gold price in 2023?

In the following, we will highlight the most important price levels for gold, taking into account the fundamental and technical picture. As the high volatility of the gold market and the uncertainty of the future make forecasting very difficult, these estimates often turn out to be inaccurate. For example, various analysts are forecasting prices of $4,000 an ounce and $1,700 an ounce for the end of this year. Everyone should study the issue independently and make their own decisions. The following analysis is rather general and should not be used to make investment decisions.

If you look at the technical picture of the gold price chart, there are a number of important levels to keep an eye on. At the time of writing (25th January), gold is trading at $1,937 an ounce.

Firstly, there are a number of major support points from which it will be more difficult for the price to break down.

Last year, a strong support point formed at $1615, from which gold bounced back on three occasions – in September, October and November. This is also the level to which the gold price could potentially fall temporarily during a liquidity or economic crisis. Looking at several years at a time, there has also been strong support in the $1680-1720 range in the past.

An important psychological level is also at $1,800. In addition, this level is also the 200-day moving average that gold broke through last month. If the price is above the 200-day moving average it acts as support, if below it is a resistance level.

The first resistance level is the psychologically important $1900 level for gold, followed by the $2000 level. The strongest resistance is at the 2050-2075 dollar level, where gold has been twice in the last two years. Gold reached a record high in August 2020, rising to $2075 an ounce.

The gold price is expected to remain under some pressure in the first half of the year, given the risk of a recession and rising interest rates. If the Federal Reserve and other central banks are forced to start cutting interest rates again this year, gold could challenge the $2050 level again in the second half of the year and potentially even attempt new records. Given the high degree of uncertainty surrounding various factors, gold is likely to continue to see large price swings this year. In the longer term (several years), however, it is clear that interest rates cannot be raised further at any point without creating a major economic crisis due to very high debt levels. This means that there will inevitably be a return to low interest rates and money printing to keep the monetary system running, which will help gold prices to appreciate in the long term.

Gold price (XAU-GBP)
1,630.27 GBP/oz
+ GBP17.32
Silver price (XAG-GBP)
20.05 GBP/oz
+ GBP0.03

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