The price of gold is rising and recently reached nearly $2,000. The current events could be the beginning of a real surge in prices, and the target of $3,000 is no longer far away. Low interest rates tend to erode the value of the dollar, and investors are turning away from this currency and towards gold. In this context, the current period is favorable for taking advantage of the next surge in prices.
Saxo Bank predicts that the price of gold will rise again in 2023, reaching $3,000, according to its annual “Outrageous Predictions.” Ole Hansen, a commodity strategist, explains that central banks and markets have underestimated inflation as a passing phenomenon, and that this will be recognized next year. The precious metal is popular among investors as a hedge against inflation. Hansen believes that the reopening of China, geopolitics, massive investments in national security, and additional liquidity to avoid distortions in the bond market will be factors driving the price of gold in 2023. All of this should allow the price of gold to break the previous record of $2,075 and reach at least $3,000 next year. In addition, commodity prices, from grains to base metals to energy, have risen since the beginning of the year due to supply difficulties.
Same point of view has Eric Strand, founder and portfolio manager at AuAg funds. AuAg Funds in Stockholm provides various investment options for precious metals. For those interested in investing in gold, the Royal Mint offers a one-to-one gold ETF called RMAU. For those looking to invest in miners instead of directly in the precious metals, the fund offers an ETF with just gold in it, or an ETC with a bullion bar over a straight gold commodity. According to Eric Strand, the arguments in favor of investing in gold and silver resurface during times of economic stress, despite perpetual disappointment from investors seeking incremental increases in yield. Strand believes that both gold and silver are currently undervalued, with the current gold to silver ratio at 82, whereas the ratio should ideally be at 60. However, in a bull market for precious metals, the ratio could potentially drop to 30, resulting in a greater increase in the value of silver. Strand suggests that if gold prices rise to $3,000, a level that would make gold fairly priced, silver prices could potentially reach $100 per ounce, making silver a more lucrative investment option.
Other specialists see the ounce at $5,000.
According to former executives of Canadian mining company Goldcorp, David Garofalo and Rob McEwen, gold could be the next to soar. They predict massive investor awareness of global inflationary pressures that are less transitory than expected. Once this happens, gold will regain its appeal as the preferred refuge against inflation, which will likely drive prices up to $3,000 per ounce, according to David Garofalo, who currently heads Gold Royalty Corp. Rob McEwen even predicts an ounce at $5,000 in the long term.
The two experts also cite central banks’ monetary expansion and the increase in global debt, which they believe will encourage investors to return to traditional methods of wealth protection, such as gold. For David Garofalo, gold is better positioned than cryptocurrencies as a hedge against an inflationary environment due to its universality and 4,000-year history.
However, these predictions are unlikely to happen.
A price of $3,000 per ounce of gold would correspond to an increase of nearly 45% compared to the historical record of $2,067 reached in August 2020 and over 50% compared to the current ounce price, which is around $2,010. Sector leaders have rarely predicted such dramatic increases over such a short period, but David Garofalo believes the reaction should be violent when it occurs, saying it could happen in just a few months.