For those that have invested in the precious metals market or are considering buying gold, reviewing the previous year is an excellent way to consider the options available and make the best investment decisions.
A lot can change in a year in the gold investment market. So now that 2022 has drawn to a close, it is the ideal opportunity to look back on gold prices for the past 12 months and look ahead with predictions for 2023.
In this blog post, we will examine gold prices for 2022 and identify the market forces that have impacted the gold price in the U.K. and globally. We will also turn our attention to 2023 and forecast what the year is expected to hold for gold prices based on previous trends and expert opinion.
2022: A Year of Uncertainty
After the disruption of the pandemic and the associated financial chaos this caused, 2022 was predicted to be a more stable year for the global economy. Despite many investments being negatively impacted during 2020, the precious metals market held its own, which continued into 2021. As Forbes reports, the precious metals markets provided security for investors during this turbulent time. In fact, in the United States, gold even outperformed the U.S. equities market post-pandemic.
With businesses back open and a return to normality expected, many investors had high hopes for 2022. The new year started well for gold prices. 2022 began with the U.K. gold price at £1358.06 per troy ounce. Gold prices then experienced a bumpy ride throughout the rest of January 2022, with its value fluctuating throughout the month. This was a trend set to continue throughout the year.
Despite fluctuating gold prices throughout 2022, the price of the yellow metal saw a significant uplift in early February. This month marked the start of a steady incline in gold prices, with values quickly accelerating to £1538.81 per troy ounce on the 11th of March, 2022. So, what led to this vast increase in worldwide gold prices in early March 2022?
Geopolitical Influence on Gold Prices
As mentioned above, gold prices rose fast from mid-January through February 2022, reaching a peak of over £1,500 per ounce in mid-March. This acceleration has been widely attributed to Russia’s invasion of Ukraine. When the invasion began at the end of February, investors were quick to put their money in precious metals.
As a result of the invasion, there was speculation of U.S. sanctions being placed on Russian oil exports. This speculation drove U.S. gold prices to their highest levels since the peak of August 2020. With potential oil embargoes sparking concern for slowing economic growth and soaring inflation levels, investors turned their attention to the traditional safe haven offered by precious metals.
The Impact of Rising Inflation
Hedging against inflation is one of the main reasons that people invest in precious metals such as gold. With gold considered a safe investment even in times when purchasing power is reduced.
May 2022 saw U.K. inflation rates at their highest level for over forty years. With inflation at 9.4 percent, the cost of fuel and food soared during 2022. With the price of goods increasing, the value of the pound decreases. This rise in inflation leads to a bull market as investors begin to convert their cash holdings into gold.
The Fed Effect
As well as a potential oil embargo by the United States on Russia impacting gold prices, the so-called Fed effect has further influence over the price of precious metals. The relationship between the U.S. dollar and gold prices is a strong one. When the U.S. dollar reduces in value, the price of gold rises, and vice versa. The dollar’s influence over gold prices was demonstrated in 2022, when the gold market grew by 7 percent in November while the U.S. dollar decreased in value.
Overall Precious Metals Prices for 2022
According to the World Gold Council, many investors have raised concerns that gold prices did not perform as well as expected in 2022. In times of high inflation, gold prices traditionally soar. In 2022, there was the added impact of geopolitical issues, which did cause gold prices to rise, but not by the level many industry insiders expected.
Despite gold prices not reaching the level that many experts had predicted, it is crucial to remember gold has still outperformed most other assets during 2022. So, when considered in the context of the broader economy, gold prices in 2022 remained true to their reputation as a reliable investment during turbulent times.
Gold is the most valuable of the precious metals and typically maintains a higher price than silver, platinum, and palladium. But, while gold may have a higher price than its counterparts, it is still worth monitoring how these other precious metals are performing in terms of price. Each of these precious metals provides the opportunity to hedge investments and diversify. Therefore, monitoring their prices is wise for every potential investor in the precious metals market.
The silver price remained relatively stable throughout 2022. However, according to the Silver Institute, industrial demand for silver increased, and physical investment in silver was predicted to increase by 18 percent in 2022.
The precious metal started 2022 with silver prices at £19.48 on the 1st of January and ended with silver rising to £19.96 on the 31st of December 2022. As of 11th of January 2023, silver has got the year off to a strong start with prices at £19.33.
Key Takeaways From Gold Price Performance in 2022
- Gold prices may not have reached the high some predicted, but they still outperformed most other investment types.
- With geopolitical issues and an unstable financial climate continuing in 2023, investing in gold is likely to continue to be viewed as an effective hedge.
- Gold prices rose in 2022. Prices started the year at £1358.06 per troy ounce on 1st January and ended at £1514.53 on 31st December 2022.
- Gold prices peaked at £1584.41 per troy ounce on the 26th of September 2022.
Gold Price Forecast for 2023
While no one has a crystal ball, signs so far suggest that 2023 could be a good year for gold prices. If the uncertainty and economic instability of 2022 continue into 2023, gold will likely be in more demand than ever. Here are some further factors that could potentially impact the gold price in 2023:
Speculation Over Rising Interest Rates May Drive Gold Prices Up
One key question on everyone’s lips for 2023 is will the incline in gold prices witnessed in late 2022 continue? As of 11th January 2023, the answer to this question currently appears positive. Already the gold price is 15 percent higher than it was on 3rd November 2022. The reason for this incline is the expectation that the Federal Reserve will soon announce that it will slow its interest rate rises. Lower rate rises mean more pressure on the dollar, making gold and other commodities less expensive for overseas buyers.
Gold to Continue to be a ‘Safe Haven’ Investment
Gold is currently enjoying its best run of prices since the pandemic hit in 2020. During the pandemic, gold prices reached a record high of $2,067 per troy ounce on the 7th of August 2020. As Forbes reports, this surge in the gold price was due to precious metals being considered a safe haven for investments during this disruptive time.
Key Predictions for Gold Price Performance in 2023
- As of 11th January, the U.K. gold price for 2023 is already 15 percent higher than at the beginning of November 2022, showing a positive trend toward an incline throughout the rest of the year.
- Gold is often the investment of choice as part of a diversified portfolio. With concerns about rising inflation and speculation that a recession is on its way, many people will turn to gold to hedge their investments. This demand should help to drive up prices during 2023.
- Though the geopolitical and financial climate remains uncertain as we enter 2023, gold prices may benefit from this as investors use the precious metal as an effective hedge.
Even in turbulent times, gold will always be seen as a reliable investment. While other investments falter in times of recession and high inflation, gold is widely considered a safe investment. So while there may be uncertain times ahead with economic instability and geopolitical issues dominating the headlines, there is one thing that you should be able to depend upon; gold. Of course, no investment comes with guarantees; past performance is not always a reliable indicator of future returns. But, based on the history of precious metal prices, gold should continue to be a reliable long-term investment.
Are you planning to invest in gold or silver? Please feel free to contact us with any questions relating to gold prices or investing in gold, and we will be happy to help.
