What a year for gold!
The precious metal leapt out of the gate at $1,824 per ounce in January, possibly bolstered by tailwinds from continued inflation pressures, Fed rate hikes and colossal central bank buying in 2022.
As you may recall, inflation reached a staggering 9.1% in 2022 — the highest in 40 years. In response, the Federal Reserve started raising interest rates for the first time since 2018.
This policy shift signaled the end of America’s “easy money” years and sent ripples through the global economy.
From there, gold went on quite the journey.
Here’s a quick review of gold’s moves throughout the year, starting with:
Q1 January 1st – March 31st, 2023:
By the end of January, gold’s price had gained over 6%, and The World Gold Council says a good part of its early performance was “attributed to the weaker US dollar, followed by a sizeable 37bps drop in the US 10-year Treasury yield.”
March brought further economic drama, as a potent combination of nine consecutive Fed rate hikes and the collapse of Silicon Valley Bank and Signature Bank heightened investor anxieties and drove a surge of flight capital into gold.
Q2 April 1st – June 30th, 2023:
On April 14th, this surge moved gold up to $2,041 per ounce — its second-highest price on record at the time.
By May 4th, the Fed’s aggressive rate hikes, concerns about the stability of the US banking system, and reactions to a weakening US dollar pushed gold prices past $2,069 per ounce — only a few dollars shy of August 2020’s record high of $2,074.
In June, results from a Gallup poll revealed the number of Americans who considered gold the best long-term investment had nearly doubled from 15% to 26% — due, in part, to continued concerns over the US banking sector.
This concern extended to global central banks, who continued accumulating gold at the fastest pace on record.
Forbes commented: “Gold is on the precipice of hitting its highest price on record as investors turn to the safe-haven asset amid a rocky macroeconomic environment, and analysts believe the precious metal could have much more room to run…”
How right they were…
Q3 July 1st – Sep 30th, 2023:
By July, central banks from several countries were pulling their gold out of foreign vaults in a process called repatriation.
And according to data from the annual Invesco Global Sovereign Asset Management Study of 85 sovereign wealth funds and 57 central banks, the main reason for their repatriation efforts was clear:
“A substantial percentage of central banks are concerned about the precedent set by the US freezing of Russian reserves.”
On August 1st, US credit rating agency Fitch downgraded US credit from AAA to AA due to “the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance relative to ‘AA’ and ‘AAA’ rated peers.” This caused a cascade of foreign investors to drop their holdings of US debt.
Q4 October 1st – Dec 31st, 2023:
On October 27th, a rush of diversification buying triggered by news of tensions in the Middle East pushed gold across the $2,000 mark for the fourth time in history.
And by November, Moody’s credit rating service changed its reading from “stable” to “negative,” central banks continued buying gold to hedge against inflation, and BRICS de-dollarization efforts intensified.
With all these pressures, including persistent inflation, rising geopolitical conflicts and economic fallout from the $33 TRILLION national debt, gold’s price edged north and flirted with its earlier record high a few times during the year but was unable to break through, until…
Anticipation of Fed rate cuts helped push the precious metal to a record-shattering, all-time high of $2,152 per ounce on December 4th, 2023.
While gold’s 2023 performance was impressive, analysts are divided on its future trajectory.
Some suggest gold could face headwinds in the coming year due to potential strengthening of the dollar and potential economic improvements.
Others believe ongoing economic uncertainties and a weakening dollar could push gold to a new record high in 2024.
Stay tuned!
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November 15, 2023