Gold Outlook: Prices Gain Marginally Higher In 2022, Likely To Be Flat In H1CY23

The yellow metal has gained marginally (0.5-1%) this calendar year in dollar terms. It has gained over 11% in rupee terms. The attractiveness of gold is high in a low-interest rate regime. Gold has started giving up gains since the US Fed and other major central banks started hiking rates in May 2022. The rising rates, hawkish comments, and withdrawal of easy liquidity reduced the investment appeal of gold.

We expect gold prices to trade sideways till H1CY23. Festive demand and global central banks pausing their rate-tightening policy will push demand for gold in H2CY23. A pause in the rate hike cycle will lead to softening of the USD, thereby making it cheaper to buy gold and silver. Gold is an international commodity and is mostly traded in USD. So the USD trajectory impacts the prices of these precious metals. Expect gold to trade in the range of $1900-1975 in CY23, Rs 55,000-57,000 in INR terms

The demand for silver remains robust as it is an industrial commodity. Further, a shift to 5G technology and related upgrades, solar energy, and EVs will keep silver demand high in 2023. For silver to scale new highs in 2023 it is important to first cross March 2022 highs ($24) and then August 2020 highs ($28). These levels will act as key resistance levels.

As China is the biggest consumer of gold - the lockdown situation in China, demand during the Chinese New Year in February and the Golden Week in October will drive prices. The trade tensions between the US and China are another big factor that may affect prices. Any escalation of geopolitical tensions between Ukraine-Russia, recession in the West, movement of the Dollar index, and gold buying program by global central banks will guide the larger price trajectory for gold and silver in 2023.

(About the author: Colin Shah is the Founder and Managing Director of Kama Jewelry. Mr. Shah initiated into the diamond trade at the age of 17 with hands-on training in polished assortment, diamond manufacturing, and jewellery manufacturing. He is a first generation entrepreneur who started own business at the age of 21, exporting diamonds to Japan and Gulf along with the local market. He is a certified Gemologist from International Gemological Institute. He is Former Chairman of Gem Jewellery Export Promotion Council (GJEPC), and current member of FIEO)