Analysts predict that gold will have a challenging start to 2023 but will shine more toward the end of the year.

Financial markets are still dominated by uncertainty as central banks’ monetary policies cause a worldwide recession to curb inflation. Watch GK News to hear from professionals on how to survive the choppy financial markets in 2023.

The gold market is concluding 2022 on the rise in about a neutral zone at around $1,800 an ounce after a hard year loaded with challenging obstacles.

The price of the precious metal is anticipated to drop by less than 2% at the year’s conclusion, placing it second among the best-performing assets just behind the US dollar. Although the market is becoming more bullish, some analysts caution investors that they will need to exercise patience in 2023.

Although the gold market is expected to continue outperforming most asset classes in the new year, some central banks and commodity analysts expect to see a significant push higher in the year’s second half. Gold prices are expected to remain at around $1,800 an ounce in neutral territory.

The Federal Reserve’s solid monetary policy stance, which weighed on gold for most of the year, may persist until the first half of 2023.

In its last monetary policy meeting for 2022, the Federal Reserve forecasted the Fed Funds rate peaking above 5% in 2023. The central bank’s updated forecast capped a year with the most aggressive tightening cycle since 1981 as inflation rose to a more than 40-year high.

Although inflation has come down from its summer highs, Federal Reserve Chair Jerome Powell said that the central bank’s job isn’t finished.

“Even with today’s action, we are not in a sufficiently restrictive position. When we reach that position, the next consideration is how long we should remain there. And there is a strong belief on the committee that we must stay there until we are convinced that the rate of inflation is down sustainably, which we believe will take some time, “At a press conference on December 14, he stated.

Despite the Federal Reserve’s steadfast stance against inflation, economists point out that the institution is nearing the conclusion of its cycle of tightening, which may be advantageous for gold.

According to Bank of America, the Federal Reserve will stop tightening policy in March, and the first rate cut will occur by the end of 2023.

According to Bank of America’s commodity expert Michael Widmer, the price of gold may reach $2,000 per ounce in this situation.

By the end of the year, the Federal Reserve is also expected to lower interest rates, according to commodity analysts at Commerzbank. However, as investors get used to a new terminal rate climb above 5%, gold prices may struggle in the short run.

The Fed is projected to decrease the benchmark rate again around the end of 2023 in light of a weak economy and lower inflation after what is anticipated to be the final interest rate boost in March. On the other hand, the Fed still needs to make this prediction. According to analysts at the German bank, the gold price should increase again as soon as the Fed follows suit.

As the U.S. economy will have been in a recession since the start of the year, this should be the second half of next year when inflation will have sufficiently decreased. The decline of the U.S. should also help the price of gold.

In 2023, how low can gold prices fall?

The Federal Reserve will continue to tighten its monetary policy in the coming year despite reducing the rate hike pace, which will reduce investor interest in gold.

In 2023, central banks will keep buying gold.