Saxo Bank has a track record of making bold predictions, and now they're interested in the yellow metal. According to the investment bank, Gold could rise to $2,075 by the end of 2022.
Their reason is inflation which is continually impacting the commodity's price. But Saxo Bank doesn't expect Gold's price to linger around the $2000 mark. Their experts believe Gold will eventually hit $3,000 in 2023.
But is there some truth to this claim? You're about to find out.
This article discusses the validity of this prediction and what may drive Gold prices in the future. You'll also learn to be financially ready for a possible price increase in 2023.
The answer depends on how you view the current market situation. Inflation and other economic factors can take Gold to new heights.
However, there's no guarantee it's going to happen. But Saxo Bank has made some wild predictions previously that have come true.
Therefore, Investors will need to keep an eye on the Gold price prediction if they want to make a big profit. But what factors can impact the Gold price? Let's find out.
Gold is still a top commodity for investment and industrial purposes. The following factors drive its price higher over time:
All central banks hold varying quantities of Gold and paper currencies in reserve. These quantities increase or decrease based on which commodity a central bank invests in.
For example, a central bank may trade $1 billion of paper currency in exchange for Gold. This measure will cause a decrease in its paper currency reserves and an increase in its Gold holdings. And many banks do it regularly.
In fact, according to a Bloomberg report, Global central banks have been stocking up on Gold since the US abandoned the Gold standard in 1971.
Every year, different central banks take the lead in buying the most Gold. For instance, in 2019, Turkey became the largest buyer of Gold, followed by Russia, Poland, and China.
In October of 2022 alone, central banks added 31 tonnes of Gold to their current holdings. Such acquisitions are bound to drive up the price of Gold in years to come.
Generally, the Gold price is inversely related to the US dollar value. This is because the metal is dollar-denominated.
A stronger US dollar keeps the Gold price low and controlled, while a weaker one is likely to increase the Gold price.
In 2019, jewelry accounted for an estimated 55% of the global Gold demand. According to the World Gold Council, this amounted to more than 4,400 tonnes!
In terms of volume, India, China, and the United States are, on average, the largest consumers of Gold for jewelry.
A further 7.5% of the demand for Gold is attributed to technological and industrial uses - used to manufacture medical devices like stents and precision electronics like GPS units.
As such, Gold prices are affected by the basic theory of supply and demand. Gold prices are bound to go up as consumer goods like jewelry and electronics demand increase.
When the economy gets unstable, investors turn to Gold because of its enduring value. This is why Gold is considered a haven asset as well.
Investments in Gold also increase when expected returns on bonds, equities, and real estate decline resulting in a price rise.
Gold can also be used as a hedge to protect against inflation or currency devaluation. It's also known to shield wealth during periods of political instability.
Huge Gold demand can also be seen from exchange-traded funds (ETFs). These ETFs hold the metal for investors and issue metals that investors can buy and sell. For example, the SPDR Gold Trust is the largest, with over 1,078 tonnes of Gold in March 2021.
In 2019, gold purchases from various investment vehicles were 1,271.7 tonnes. This represented over 29% of the total gold demand.
In 2018, gold mine production was roughly 3,260 tonnes. This number is up from the 2,500 tonnes recorded in 2010.
That said, Gold production hasn't had any significant changes since 2016. This is despite the increase recorded over ten years. One primary reason is that the "easy Gold" has already been mined. This means miners now have to dig deeper to access quality gold reserves.
The fact that Gold is harder to access leads to more problems. It means miners are exposed to more harm and negatively affect the environment. Essentially, it costs more to get less cold. These extra costs in gold mine production also result in higher Gold prices.
If you're eager to trade Gold better in the coming year, here are five tips to keep in mind:
If a country's currency strengthens or becomes stronger, investors can buy cheap Gold with a stronger currency. This means that although the gold prices in the home country remain the same, the value of Gold will become cheaper for investors with a stronger currency.
Gold is an asset that's suitable for long-term investment. This makes it difficult for investors to see big changes in short-term gold trends. However, when the price rises sharply, many investors actively buy Gold. This is because they expect to see quick profits.
But, the main advantage of Gold is long-term risk avoidance. So, the best strategy is to ensure your investments in Gold aren't too high. This ensures you don't get stranded if you want to profit from a short-term trend.
Investors panic if a gold trend reverses in the opposite direction after they've opened a trade. Most are tempted to increase their losing position to minimize losses. These transactions are dangerous because you might compound your losses.
If the gold price has risen for a while, it may have topped by the time you're buying. So the best course of action is to cut your losses if it starts falling after you've bought them.
Gold prices tend to trade in the opposite direction to other trading markets. This means adding Gold to your portfolio can diversify your risk exposure. In this case, it's advisable to buy Gold in batches. Then, if the price keeps rising, you can place orders in one direction and add to your position on pullbacks.
Short-term traders invest in Gold with hopes of making a quick profit, but the opposite is mostly the case. In short-term trading, traders stand a better chance of making losses than profits.
Gold investment requires analytical skills, which can be acquired over time. As Gold prices tend to change slowly with minor fluctuations. So in order to make a profit, you need to wait for gold prices to appreciate and not run after short-term gains.
2023 promises to be a good year to trade Gold with high prices on the horizon. This article covers the key price drivers and the best tips for trading effectively. With this, you'll be on track to earn from the yellow metal successfully.
You can also use our trading platform to access the commodity market and lock in Gold profits on the go. At ISA Bullion, we provide live market updates to make your investment journey easy. You can also use our app to trade from any location you choose.
So sign up today and start trading Gold effectively.