2022 Precious Metals Market Performance & 2023 Market Forecast

Highlights:

• Recap previous months' performance (Jan 2023)
• Recap of 2022 precious metals performance: gold held steady, silver had a slight decrease, platinum decreased, and palladium saw an increase
• Influence of economic and political conditions on gold prices
• Inflation, interest rates, and market volatility impacted gold prices
• World Gold Council reported an 18% increase in global gold demand in 2022
• Silver prices followed a similar trend as gold, while platinum and palladium saw ups and downs
• Predictions for 2023: mixed results in global markets, settling interest rates, China may struggle to regain a foothold

Welcome to 2023

While property and share prices tumbled around the globe last year, gold and other precious metals gave investors a lot to be confident about. 

The last twelve months saw gold prices experience an initial downward trend before making a steady recovery from September as economic and political conditions drove investors towards precious metals.

This month’s feature shares a look back at 2022, plus expert forecasts for the year ahead. 

January 2023 precious metals performance

Spot gold holds steady: Gold started the year at $2687.03 AUD, peaked at $2795.23 AUD on January 19, and ended the month at $2733.94 AUD

Silver settles slightly: Silver opened at $35.40 AUD in January before finishing the month at $33.59 AUD

Platinum is down: Platinum started the year at $1576.84 AUD before dropping to $1437.65 AUD at the end of January

AUD to USD Currency Chart

Source: OFX

The AUD/USD traded consistently higher in January after dropping to lows of 0.61 in Q4 of 2022. 

Economists say the January performance is partially due to a lack of interest rate announcements from Australia, but that the next directional movement of the AUD/USD will be highly dependent on US Federal Reserve interest rate decisions throughout the year.

Gold and precious metal performance in 2022

Overall, gold was viewed as a stable investment over the last twelve months. 

While prices fluctuated throughout the year, there was still growth. The year commenced with prices at $2507.32 AUD/oz, with prices stabilising to $2685.25 AUD after hitting a low point of $2462.98 AUD in August and a high of $2812.25 in March. 

The Q1 price spike was attributed to Russia’s invasion of Ukraine. This caused a level of uncertainty that triggered investors to transfer to more of a ‘safe haven’ asset. However, the rise was relatively short-lived and values had settled by the end of the quarter. 

The other key factors influencing gold's value during 2022 were market volatility, interest rates, and inflation. 

Australia saw inflation figures reminiscent of the 1990s, while the US reached a four-decade high of 9.1 per cent. These figures combined with an increasingly strong US dollar put downward pressure on gold during the Australian winter months, however, economists pointed out that gold’s performance was impressive in comparison to other investments. 

Global head of research at the World Gold Council (WGC) Juan Carlos Artigas explained to Investment News that gold was actually holding steady. Mr Artigas said that “Gold has outperformed TIPS (Treasury inflation-protected securities) and, more generally, global inflation-linked bonds.”

As world economies responded to inflation figures by increasing interest rates to highs not seen for many years, gold began to make its recovery. Increased demand meant low points in value were as short-lived as the March peak, and physical bar/coin purchases continued to gain strength towards the end of 2022. Meanwhile, exchange-traded funds (ETFs) grappled with net outflows of US$3b during 2022, partially due to some ETFs liquidating during the year. 

In early 2023, the World Gold Council reported that "vigorous" bullion purchases from retail consumers and unprecedented purchases from central banks led trends in 2022. It described how annual global gold demand jumped 18% last year to 4,741 tonnes. This was partly driven by record demand in the fourth quarter. 

Silver prices followed a similar trend to gold, peaking in March before dropping to $26.22 AUD and recovering towards the end of the year to finish at $35.15 AUD. 

Platinum dropped between March and September, bottoming out at $1224.97 AUD before rallying during Q4 to $1576.03 AUD. 

Meanwhile, palladium’s trend was downwards almost throughout 2022. It finished in December at $2627.91 AUD, after a very short spike to $4371.12 in March. 

2023 Precious Metals Outlook

We often look to Swiss refiner and mining company MKS PAMP for predictions around the performance of precious metals because its financial analysts are recognised and awarded for their reports and forecasts. 

MKS PAMP shared some of the following assumptions about the economic and global conditions in 2023: 

Global markets will have mixed results: MKS PAMP points towards what it calls ‘stagflation’. This will see inflation begin to fall, but not to targets. Meanwhile, there will be uneven recovery figures across different countries and economies.

Interest rates will settle: While forecasts are different around the world, in Australia and the US it is expected that interest rates will start to ease in Q4 or potentially sooner. 

China may struggle to regain its foothold: China has ended COVID lockdowns but is now in the grip of mass outbreaks. MKS PAMP suggests there will be a “reversal of China as a consistent deflationary force” due to a more inward-looking, nationalist China, and says global corporations will “exit an uninvestable landscape”.  

Geopolitics will continue to evolve: Meanwhile, deglobalisation will continue at a fast rate due to (Western-driven) policy making that will upend commodities markets. This will see the sidelining of Russia as well as China. 

Commodities will still be hard to come by: Commodity prices are expected to remain elevated because of supply-side challenges and persistently low inventories. 

Stocks will become riskier investments: MKS PAMP highlighted how over $30tn was wiped out in global stocks and bonds in 2022; highlighting the failure of traditional 60/40 portfolios. Its outlook said equity gains may be limited.

Gold will hold steady: Gold was able to trade offensively towards the end of 2022 thanks to demand that was largely driven by India, China, and parts of Southeast Asia. Values are forecast to hold steady this year thanks to ‘stagflation’ and deglobalisation, plus the ageless appeal of the asset as a safe diversifier in uncertain times. 

In 2022, MKS PAMP forecast average Gold prices at $1800 (revised up to $2000/oz in March ’22, revised down to $1800/oz in August ’22). Gold closed 2022 at $1824/oz (average $1802.60). 

Forecasts for 2023 are as follows: 

Base case: 2023 average price forecast US$1880/oz.

2023 high-low range: US$1600/oz (new physical/fundamental floor) - $2100/oz (double top).

Outcomes are dependent on:

• Market volatility
• Global growth
• Inflation figures
• China reopening and its subsequent recovery
• Geo-economic issues such as sovereign debt
• International political volatility

Bearish outcomes may eventuate if: 

• Sticky inflation leads to interest rate rises, which may induce large-scale deleveraging in precious metals
• Asian physical demand fails to meet forecasts
• US or China have a ‘hard landing’ and new recession lows put in before responsive easing of monetary policies lead to larger rallies
• CBs monetise and sell/lend recent gold purchases (vs storing the metal) as it loses its appeal as a hedge against inflation and other volatility
• There is a $US liquidity crunch

A final note from MKS PAMP explains that silver may actually upstage gold, because it is coming off a relatively lower base, is more correlated to a weaker US$, and has less readily available physical stocks.

Meanwhile, platinum is expected to post a small deficit (including investment demand) in 2023 as demand gets a boost from: 

• Euro 7 regulations
• Resilient industrial demand
• The continuation of China imports well over demand in anticipation of the switchover to the hydrogen economy 
• An increase from HDD substitution outweighing declines in the jewellery sector.

What’s your move?

As leading economists point out, while market fluctuations and monthly gold values are interesting to watch and keep an eye on, it is long-term trends that matter. 

What’s more, economic and political uncertainty led to disappointing results for cryptocurrency investors as well as many shareholders and property owners in 2022. While the world holds its breath in anticipation of a recession, investors are turning to gold for its timeless ability to hold value. 

To discuss investment opportunities in 2023, reach out to one of our knowledgeable and supportive precious metals advisors - send us an email at info@jaggards.com.au or give us a call at 02 9230 0886.