Precious Metals Poised for Explosive Growth in 2023?

Listen, it's no secret that the popular narrative around precious metals and inflation has long been that upward price pressures should give a boost to gold and silver. But as we've seen in recent years, there can be a glaring exception to that rule, and that exception is when interest rates are also on the rise. And let me tell you, they were rising by leaps and bounds in 2022.

But let's not dwell on the past. The situation today is that we're seeing signs that inflation may be moderating, even if it persists above the Fed's 2% target. This means that the Fed could be on the verge of pausing its rate hikes. Now, a pause in rate hikes is not the same thing as an outright pivot to rate reductions, but the highly anticipatory nature of markets and assets is such that even the move toward a pause while inflation remains an issue is expected to be good for precious metals.

In fact, gold has been feasting in recent weeks on economic news and data suggesting the pause-to-pivot cycle could begin soon. Just last week, jobs data showed a decrease in the rate of wage growth, and it excited gold so much that the spot price climbed 2% that day. And just a few days ago, a favorable government inflation report pushed spot gold slightly above $1,900 - its highest level in eight months.

If the movement toward a pivot continues and rate cuts actually begin, analysts say we can expect a particularly dynamic response from gold. Some strategists even expect both the pivot and the anticipated robust reaction of gold to that pivot to begin before the year is up. Eric Strand, CEO at AuAg Funds, recently told CNBC that "central banks will pivot on their rate hikes and become dovish during 2023, which will ignite an explosive move for gold for years to come. We therefore believe gold will end 2023 at least 20% higher."

And Strand isn't the only one with high expectations for gold this year. Edmund Moy, former director of the U.S. Mint, recently said he wouldn't be surprised to see gold "topping $2,100 or more" this year. Ole Hansen, head of commodity strategy at Saxo Bank, even goes as far as to say that he expects gold to "hurtle to at least $3,000 next year."

But it's not just gold that's getting attention. Analysts are also saying that silver could outperform gold this year. Mobeen Tahir, director of macroeconomic research at WisdomTree, recently suggested that we could see "perfect conditions" for gold this year, but then went on to say that the leveraged relationship of silver to gold could see it outperform the yellow metal in 2023. John LaForge, head of asset strategy at Wells Fargo, also recently said that "in 2023, both gold and silver will do well. Silver might do even better."

In short, folks, it's an exciting time for precious metals. We'll have to wait and see how things play out, but the signs are pointing to a potentially explosive year for both gold and silver. Keep a close eye on these markets, folks.

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