Three gold price scenarios for 2023

In the first half of 2023, gold was positioned among the three most successful asset classes in North America: with a performance of +5.4 per cent, the precious metal clearly outperformed US government bonds as well as bonds of other countries, other commodities, and some equity indices. Only the S&P 500 index and the MSCI EAFE index, which tracks company shares from 21 countries, performed better. In the Eurozone, gold has risen by 3.1 per cent since the end of last year, partly due to the occasional weakening of the US dollar against the euro.

Factors determining the direction of the gold price

As every year, the World Gold Council published its “Gold Mid-Year Outlook” in July, to be understood less as a forecast than as an analysis of the decisive gold performance factors in the second half of 2023. For this purpose, the four factors which currently have the greatest influence on the performance of the precious metal in North America were identified: economic expansion, risk of economic or geopolitical crises, opportunity costs (comparison of the relative value of one asset class with others), and the so-called momentum, reflecting short-term buying trends among investors and consumers.

Restrictive policy, mild contraction or full-blown financial crisis?

In the following, only the decisive factor for each scenario is pointed out. The factors not mentioned have little to no influence on the gold performance. Scenario 1, “Continued restrictive monetary policy”, would lead to rising opportunity costs in the form of more attractive alternatives to gold and tend to prompt gold investors to sell. In the second scenario, “Mild contraction”, the rather favourable opportunity cost development for gold could lead to a somewhat weakened continuation of the previous development in 2023. In the third scenario, “Full-blown financial crisis”, World Gold Council analysts expect a strong performance of the precious metal, moderately above the previous all-time high, due to the high risks prevalent in many asset classes. Only the future can show how gold will actually perform. The World Gold Council, in any case, is cautiously positive in its outlook..