Dhe precious metals group Heraeus from Hanau is expecting a new all-time high for the price of gold in the coming months – albeit calculated in euros. “Gold is likely to hit a record high in euros,” the company wrote in its 2023 precious metals forecast released on Tuesday.
Henrik Marx, Head of Heraeus Precious Metals Trading, explained: Calculated in dollars, the company expects a gold price in the wide range between 1,620 and 1,920 dollars per troy ounce (31.1 grams) for the coming year. Currently the price is around 1780 dollars. The record of 2075 dollars from August 2020 is unlikely to be reached here anytime soon. Calculated in euros, however, the price is only around 10 percent away from its high of 1870 euros per ounce in March 2022, shortly after the start of the Ukraine war.
Central banks buy 700 tons of gold
The gold experts at Heraeus expect that with the end of the rate hikes by the US Federal Reserve (Fed) and the European Central Bank (ECB), the chances of the price of the interest-free precious metal improving. They see the main reason for the rather weak performance of gold as an investment product in the current year in the fact that the so-called opportunity costs for holding gold have risen due to rising interest rates; this means that other, interest-bearing investments such as bonds have become more attractive. Recently, however, there have been initial inflows into exchange-traded gold index funds (ETF).
In addition, the central banks bought a lot of gold. Together they have bought around 700 tons of gold so far this year. That was the highest value since 1967. There were different central banks that struck, said Marx, including Turkey. The big central banks like the Fed or the ECB are not there. The motive is often to make oneself less dependent on the dollar. In a recent publication, however, the Dutch central bank also referred to the importance of gold for central banks in extreme crisis situations.
For silver, Heraeus expects the price to range between $17 and $25 a troy ounce in the coming year. The price is currently $22.50. For platinum, the company sees the range between 800 and 1150 dollars – and the price for palladium could range between 1300 and 2250 dollars according to the estimates of the experts.
Palladium exempt from Russia sanctions
There are interesting developments for palladium from both the demand and the supply side: 80 percent of the metal is used in the car industry, and often for catalytic converters. But fewer of them should be needed if more people buy electric cars. In addition, palladium is sometimes being replaced by platinum in industry. That’s why palladium tends to be one of the losers among the metals, says Heraeus.
However, Russia is still a very important supplier with around 40 percent of global production. So far, the metal has been exempt from Russia’s sanctions. Precious metals expert Marx said he also does not expect the West to put the metal on the embargo lists: “The damage would be too great.” In particular, palladium in the catalytic converters serves environmental and climate protection. Turbulence on the palladium market due to a Russia embargo could also make it even more difficult to achieve climate targets in the transport sector.
Gold has sometimes been compared to Bitcoin in the past. However, Heraeus believes that the two asset classes are not actually comparable. Bitcoin prices of more than 60,000 dollars in the past were only a “consequence of the extremely loose monetary policy”, said Heraeus precious metals specialist Marx: “We won’t see that again in the next few years.” Bitcoin is currently around 17 000 dollars. Among other things, Marx referred to the difference between gold and Bitcoin in terms of volatility: “The movement of the price of gold in one month is there in crypto in one day.”
