Blog

Now that the final trading day of 2022 has come and is nearly gone, investors are likely to focus their attention on what the new year ahead may bring for the yellow metal. The gold market has had some solid momentum in the fourth quarter of 2022 that could very well find its way into the market as 2023 gets rolling. Some analysts have already suggested gold will push above $1900 in the coming year, while others feel the metal could even return to previous all-time highs or beyond. Whatever the case may be, the metal is likely to see some renewed volatility in the year ahead as the Fed remains stubbornly behind the inflation curve.

The Fed has already suggested that rates may need to remain higher for longer. Although this may not be what the markets want to hear, it is also not an entirely negative outlook. The Fed may have already laid the groundwork for a pause in its rate hikes in 2023, and the next signal it gives could be one for a reversal on rates. Once the Fed signals that rate cuts are imminent, the gold and stock markets could potentially take off to the upside. That signal may not arrive for some time yet, however, and may not be seen until the second half of the year ahead.

The trajectory of gold prices next year will largely depend on the Fed and what its actions or lack thereof do to the dollar. The stronger Dollar Index has been a major roadblock to higher gold prices in the past year. If the dollar remains elevated it is likely to keep any upside in gold very limited. Should the Fed signal a reversal at some point this year, however, the dollar could see significant weakness enter the market and a major reversal in the currency could get underway. Should the dollar begin to see some weakness come into the market, it could propel the gold market sharply higher in short order.

Not only will the Fed, the dollar and the outlook for policy affect gold in the year ahead, but the market may also be boosted by central bank buying in the metal. This past year saw some major purchases by global central banks and that trend could continue as global market uncertainty remains robust. Countries may look to move away from the U.S. Dollar as a major component of their reserves and could look to add gold as the dollar loses more ground as the global reserve currency of choice. This could be what really sets the gold market on fire and boosts prices into new all-time high territory. Such a move could occur quickly too, leaving slower investors chasing the metal higher and higher.

The first several months of the new year may be lacking in any fresh, pertinent information. As the year gets going, however, the Fed will likely provide numerous clues about its intentions and could fuel a significant rally in gold or have a very bearish impact on the market.