Last year proved to be a mixed bag of a year for precious metals and gold, in particular. The year was characterized by a significant amount of turbulence, with Russia’s invasion of Ukraine, historic inflation, consecutive interest rate hikes by the Fed and failures within the cryptocurrency space making the global markets extremely volatile.
Gold, which has traditionally acted as a store of value during times of economic upheaval, exhibited price volatility for the majority of the year amid global inflation, the rising cost of living and high interest rates.
Despite this volatility, gold prices trended upward as the year drew to a close, finally achieving a six-month high in late December to trade at slightly more than $1,800 per troy ounce. By the end of the year, gold was down by only 1.5% while U.S. government bonds saw a loss of 10% and the S&P 500 was down by more than 19%. The upshot of gold’s performance was that investors were able to limit their portfolio losses by storing some of their assets in gold.
A cursory glance at the most popular stories that were published last year on usfunds.com reveals that a majority of the reports had something to do with either gold mining stocks, the precious metal itself or other hard assets.
Moves by the U.S. Federal Reserve to forestall inflation by tightening its monetary policy coupled with a strong dollar caused gold prices to drop from their peak in March 2022 until they bottomed out at $1,700 per ounce, the lowest level in two and a half years. However, the precious yellow metal rallied strong in the last three months of the year, climbing by around 10% and proving to be among the most resilient asset classes of 2022. The NYSE Arca Gold Miners Index also recorded a rise in gold mining stocks of more than 32% since the two-year low in September.
Given gold’s rally in late 2022, along with its relatively resilient performance throughout the year in the face of numerous negative market factors, experts predict that the metal will perform even better in 2023. Commodities strategist Ole Hansen predicted in his 2023 outlook that once the market realizes that inflation could stay high amid aggressive monetary policy, gold prices could climb up to $3,000 an ounce. Hansen had been predicting a monster gold rally since 2020, and he said that gold prices could even climb as high as $4,000 an ounce.
Regardless of which way the movements in the price of gold go during 2023, you can be sure that extractors such as Freeport-McMoRan Inc. (NYSE: FCX) will be keeping a keen eye on the situation and recalibrating their projections as needed.
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