I’ve never been one to gamble, but it certainly looks like 2023 might be one for the record books when it comes to gold prices. On March 23, 2023—just one week prior to this piece’s being published—gold was priced at $1,991.41/oz. That’s just $81.09 shy of gold’s all-time record high price of $2,072.50/oz. set in August 2020.
According to a March 22, 2023, article by Reuters, gold prices have been rising in response to the Federal Reserve “[toning] down its aggressive approach to reining in inflation,” with an indication that “an end to interest rate hikes was on the horizon.” That same day, CNBC reported, “Gold prices have more room to rise and could go as high as $2,600 per ounce.”
Federal Reserve policies aren’t the only thing helping support gold prices.
Nothing in the financial world happens in a bubble. While one inciting incident may start a trend, most likely many factors are involved in sustaining any financial trend. So even though the Federal Reserve may be pulling back a bit on their interest rate hikes, there’s more to the rise in gold prices than just that one factor.
For example, the CNBC article listed above also notes that consumers “have been turning to gold and Treasurys after the collapse of Silicon Valley Bank and Credit Suisse’s struggles.” In fact, the recent bank failures and other issues are part of the Federal Reserve’s decision to raise rates less aggressively, with Standard Chartered Bank analyst Suki Cooper saying, “The Fed is having to balance inflation risks and economic stability, both [of which] are factors that could drive further safe-haven demand for gold,” according to the Reuters article mentioned above.
Similarly, a March 25, 2023, article by the Financial Times quotes Aakash Doshi, head of commodities for North America at Citigroup, as saying, “The big catalyst [in gold demand across multiple channels] has been the stress in the regional banking system in the U.S.”
Central banks, including Russia’s central bank, also continue to increase their gold reserves.
I’ve written before about the record amounts of gold central banks have been buying up around the world and why that may be interpreted as a possible sign of things to come.
Russia, in particular, has been making headlines for its gold purchases, with a March 22, 2023, article by Bloomberg noting that Russia’s central bank reported a purchase of 1 million ounces over the past year, putting their reserves at nearly 75 million ounces. This may be part of a strategy called de-dollarization, in which nations sanctioned by the United States or other Western countries seek to replace their holdings of U.S. dollars, the world’s reserve currency, with other assets, including gold.
If the current state of geopolitical unrest continues, these factors suggest that we may continue to see heightened gold demand from both consumers and governments.
With an eye on the future, you may find that physical gold helps provide peace of mind.
On March 27, 2023, Reuters reported that “worries over a crisis in the banking sector [have] subsided.” But we’re still hearing clients voice their concerns over their portfolios and what might happen next in the banking or financial worlds. In fact, Reuters reports in the very same article that Minneapolis Fed president Neel Kashkari points to the recent banking stress as well as “the possibility of a follow-on credit crunch” as factors bringing the United States closer to recession.
The one thing we seem to be able to count on is that we can never truly know what the future holds. Sometimes it seems as though there’s always a new financial crisis around the corner, be it a banking crisis, a recession brought on by any number of factors, or yet another fight in Congress over federal debt.
But even in the face of so much uncertainty, I’m hopeful for the future because I know that with careful planning and a refusal to “wait and see” when it comes to my portfolio, I can still build a comfortable retirement for myself and a financial legacy that I’ll be proud to leave behind for my family. I’m also hopeful because I know that my portfolio includes physical gold—an asset with a long history of use as a store of wealth and a hedge against market and geopolitical uncertainty. And if, like some headlines suggest, gold reaches new highs in 2023 and beyond, I’ll continue to enjoy peace of mind knowing that I’ve made a decision that will help protect the things I cherish most.
