(Kitco News) With precious metal picking up momentum towards the end of the year, Main Street investors look for gold and silver to be the top performers in the new year, according to Kitco's online survey.
Gold ended the year flat, while silver finished up nearly 3% in 2022. Spot gold kicked off 2022 at around $1,828 an ounce and ended it at just above $1,822 an ounce. Spot silver opened last year at $23.28 an ounce and ended the year at $23.93 an ounce.
"Thanks to an impressive recovery in the final quarter, the gold price ended the year at virtually the same level it began it," said Commerzbank analyst Carsten Fritsch.
The biggest macro hurdle for precious metals in 2022 was the historic tightening cycle by the Federal Reserve, which saw the most rapid hiking pace since the early 1980s. Overall, rates climbed by 425 basis points in 2022, rising to a range between 4.25%-4.5%.
"In view of the considerable headwind generated by the pronounced rate hikes implemented by central banks, in particular the Fed, last year's performance of the gold, silver and platinum prices was thus remarkable," Fritsch noted.
Looking into the new year, analysts see gold and silver doing well as markets start to price in a Fed pivot.
Capital Economics sees the Fed cutting rates in the second half of 2023. "Although the economy appears to have held up in the fourth quarter ... a recession is on the way, which will help to reduce inflationary pressures further. The upshot is that, despite the Fed's continued hawkishness, we still expect interest rates to be falling again by late 2023," said Capital Economics chief North America economist Paul Ashworth.
Kitco's survey results
That is what retail investors are hoping for as well, with Kitco's survey results showing participants almost equally split between gold and silver as the top two choices for best-performing assets in 2023.
Of 896 respondents, 37.5% picked gold as the top performer for 2023, while 36.8% opted for silver. The third most loved asset for the new year was copper, with just 8% of the vote. Respondents were split between oil and Bitcoin, with 4.7% of the vote going for each asset. A similar thing happened to platinum and lithium, with 3.7% of respondents voting for each. Palladium was the least favorite choice for 2023, only garnering 0.9% of the votes.
What analysts are saying
The Wall Street side is also bullish on gold and silver for 2023. Analysts told Kitco that gold is well-positioned to rally as the U.S. economy enters a recession, the U.S. dollar peaks, and the Fed reverses its monetary policy tightening.
DoubleLine Capital CEO Jeffrey Gundlach said he sees the Fed moving another 50 basis points in February, with rates potentially peaking at 5% in 2023. But once the Fed reaches 5%, it won't be able to keep rates at that level for more than one meeting, Gundlach warned, and it will be forced to cut.
The DoubleLine Capital CEO pointed to gold's predictive behavior when explaining why the precious metal is starting to move up. "Maybe this is predictive, looking forward to a weaker dollar … Dollar has peaked out," he said.
Australia and New Zealand Banking Group's (ANZ) senior commodity strategist Daniel Hynes also sees market sentiment turning in favor of gold. "Gold prices tend to come under pressure ahead of recessions but then outperform other markets (such as equities) during them," he explained.
Gold is already starting to price in a pause by the Fed, followed by an eventual pivot, Wells Fargo's head of real asset strategy John LaForge told Kitco News.
"In the last couple of months, with all the talk about the Fed pivoting, gold started to perk up. In 2023, both gold and silver will do well. Silver might do even better," LaForge said.
Wells Fargo sees gold between $1,900 and $2,000 in 2023. "If we can hit that, my bias is to increase those targets," he pointed out.
In the meantime, gold is still in a prove-it mode, according to LaForge. This is because while commodities have done well in the last couple of years, gold has been stuck. "I need confirmation through the price that gold is starting to move. If it does, it could go even higher than $1,900-$2,000," LaForge said.
Many analysts are even more bullish on silver in the new year. "I am a little more positive on silver now that we are back to $23. It is the high-beta play," LaForge added. "Over a supercycle, which is 10+ years, percentage-wise, silver does better than gold. That's what happened during the last cycle between 1999 and 2011. That is typical," LaForge said.
Silver has also been neglected by investors, which is why it has a lot of potential at current price levels, Gainesville Coins precious metals expert Everett Millman told Kitco News.
"Silver will outperform gold — that is the pattern that tends to play out during bull runs for precious metals. And its recent action is encouraging," Millman said.
Plus, the available supply for silver investment products is rather tight. "Silver sitting in vaults, which can be used for bullion products and investment products, has been getting tighter and tighter. A major issue for 2023," Millman explained.
Read more analysis on gold and silver in 2023 on Kitco's outlook page.
