Precious metals trader Heraeus Group predicts that several geopolitical and economic factors will play a major role in silver, platinum and gold markets through 2023. Last year proved to be extremely volatile, with the Russia-Ukraine war slowing down the already weak global economy and lockdowns in China crippling the country’s economy and impacting supply chains around the world. Prices for commodities such as gold, palladium and silver rallied in the wake of the Ukraine invasion but saw their prices settle at lower levels as the war waged on.
With most of the world still grappling with rising inflation and increased cost of living, experts predict slower economic growth in 2023. Signs point to a recession in major markets, including the United States and Europe, this year amid slowed economic growth; precious metals traders believe this will likely weigh on the commodities markets.
Gold prices, for starters, have been kept in check by a strong greenback despite decade-high inflation levels that would have traditionally increased gold’s haven metal appeal and raised its prices. This is due to the fact that the U.S. Federal Reserve has consistently raised benchmark interest rates for several months to forestall inflation, increasing the opportunity cost of holding nonyielding bullion and decreasing its appeal to investors because it doesn’t earn any interest.
If the Fed continues with its aggressively tight monetary policy into the new year, more investors may move away from gold to other assets that can allow them to leverage the higher interest rates and secure a greater ROI. On the other hand, Heraeus says, the Fed may loosen its stance amid a weakening economy, causing the dollar to lose some of its strength and increasing the value of gold and silver holdings.
According to Heraeus, investors may see a record high return on their gold holdings “in euro terms” if the Fed keeps benchmark interest rates stable or reduces them. Estimates from the Germany-based precious metals trader show that the Federal Bank’s actions could cause gold and silver to trade between $1,620 per ounce to $1,920 per ounce and $17 per ounce and $25 per ounce respectively in 2023.
As with gold, platinum also saw its prices drop as the dollar surged in late 2022; the metal should see an upward trend if the greenback weakens this year. However, the platinum market remains oversupplied by more than 400,000 ounces, and the metal is predicted to trade at between $800 to $1,150 per ounce.
The market movements in the commodities industry are likely to impact the short-term performance of extraction firms such as Southern Copper Corporation (NYSE: SCCO), especially if a recession takes root.
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