Gold is still a hedge against volatility. Even in conditions of limited movement, it has retained a high correlation with world prices at the Moscow Exchange rate, analysts at RSHB Asset Management noted following a gold market analysis.
In 2022, gold prices experienced significant pressure from the tight US monetary policy despite high inflation caused by the shortage of goods and commodities due to the post-Covid recovery of the global economy (except China) as well as geopolitical factors. The price of gold remained low against the backdrop of a strong dollar despite high inflation and high inflation expectations. As soon as inflation began to slow down, the market began to expect the US Federal Reserve to ease its monetary policy, and gold prices went up, and the dollar began to weaken.
According to the RSHB analysts, in 2023, the market expects the US Federal Open Market Committee (FOMC) to continue slowing the pace of rate hikes, which is likely to lead to a further weakening of the dollar and an increase in gold quotes. By the middle of the year, the Federal Reserve plans to stop the series of rate hikes having reached the top level of its target fed funds rate for this cycle at around 5%. From that point on, the market will monitor the state of the US economy, which may go into recession due to rate hikes; that may call for rate cuts, which, in turn, will support gold.
Another growth factor for gold is the increased interest among investors, which grows tendentiously when the quotes go up. Central banks significantly stepped up gold purchases in the third quarter of 2022, a pace not seen since 1967.
“We expect gold to reach the level of $1,900-$2,000 per ounce by the end of 2023 under the influence of the above factors. At present, it has adjusted to $1,883 from $1,959 in January, which offers investors a chance for a good entry into the market,” said Alexander Vlasenko, portfolio manager at RSHB Asset Management.