The price of gold depends mainly on its demand as an investment. In this sense, its opportunity cost is key, since it does not generate income. This cost has increased significantly with the increase in real interest on ten-year US Treasury bonds, which has gone from minus 1.1% in March 2022 to over 1.7%, as these bonds have proven to be active safe and therefore an alternative to gold ira companies. So gold looks relatively expensive. In any case, the real yield – discounting inflation – to maturity of US debt may not increase much more in 2023 from current levels.
In addition, the investment demand for gold also depends on the dollar exchange rate, inflation expectations and global uncertainties. In this regard, we estimate a devaluation of the dollar in 2023, which should provide support for the yellow metal. In addition, the high uncertainties, economic and geopolitical, favor it. On the other hand, the decline in inflation may erode the attractiveness of gold as a hedge against it. But inflation is at a relatively high level, and its decline may result in a less restrictive monetary stance by the Federal Reserve, which favors the relative value of gold.
In addition, one must take into account the demand for gold from the central banks themselves.
So gold, despite the fact that real rates in the US are now significantly less favorable than in previous years, can perform quite well against the dollar in 2023. In twelve months it can be around $1,880/ounce.
As for silver, it has performed well in recent months, but recently investors, through the futures market, have taken lower hedging positions against this precious metal. In addition, the stabilization of its demand for ETF exchange-traded funds is observed, although also strong imports from India, probably due to the accumulated demand after Covid-19. But it is not foreseeable that the demand for physical silver can maintain its recent pace. Indeed, the slowdown in major economies is likely to exacerbate downward pressure onits price. The point is that silver relative to gold is already close to its long-term average. So we are cautious on silver in the short term. Mind you, it may outperform gold if industrial demand improves, especially with a global economic recovery in the latter part of 2023, as well as structural demand linked to the energy transition, which may provide long-term support. With this, it can reach 25 dollars/ounce in twelve months.
For its part, platinum is still at the lowest price level in decades. Among other things, its supply/demand balance is likely to deteriorate in the coming years, due to the growing market share of electric vehicles in car sales. It must be taken into account that 85% of the demand for palladium comes from catalytic converters for internal combustion cars and the decrease in its share is a clear threat. Furthermore, although there are risks of supply interruptions from Russia, a large producer of this metal, there are no signs of a decline in its production so far in relation to previous years. Overall the palladium price looks high and its upside potential is limited in 2023.
However, the demand for automatic catalysts represents slightly less than 40% of the demand for platinum, which has come to perform better than palladium. Although the decrease in such demand is negative, the appearance of fuel cell electric vehicles can counteract it, since platinum is key in this technology. However, it may take years before a significant lawsuit is filed. Even so, platinum is used in jewelry and in various industries. Indeed, its price is positively correlated with that of gold, as a substitute in jewelry, which makes it somewhat less volatile than palladium. In fact, platinum looks quite cheap and its outlook is significantly brighter than palladium’s. In twelve months it can be at $1,150/ounce while palladium falls to $1,700/ounce.