Gold Prices Slowly Gain Steam in 2023

Since the economic outlook over the past months was full of uncertainty, gold stocks reflected investors' fears as they have been experiencing an upward trend. Experts believe that gold prices will gradually increase in 2023.

Historically, gold has often served as a safe-haven commodity in times of uncertainty. Since inflation seems to start cooling down in the US, it is expected that the Federal Reserve System will slow the pace of interest rate hikes, which makes gold a more attractive option for investors. Since late November, gold futures gained 18 percent value and hit US$1,882/oz this Wednesday. 

Similarly, the price of gold stocks has been slowly but steadily gaining value after trending downward between September and November 2022. VanEck’s Gold Miners ETF (GDX), which according to Forbes is a benchmark for the sector, has increased its value by over 20.2 percent over the past six months. GDX seeks to replicate the price and yield performance of the NYSE Arca Gold Miners Index (GDMNTR), which has also performed well in the same six-month period, gaining over 22.4 percent value. 

Among the 49 GDX holdings, US-based Newmont Mining represents over 12.8 percent of the ETF’s assets. The company is the world's largest gold miner but its stocks have not performed well over the previous two quarters with a loss of over 9.8 percent of value. However, a Forbes analysis highlights that over 50 days, shares have experienced an upward trend that if continued could take out the 200-day declining moving average. 

Barrick Gold, which represents over 10.3 percent of GDX assets, has performed well with an increase of over 6.7 percent in the last six months. 

Another important company is the Canada-based Agnico Eagle, which represents 7.66 percent of GDX holdings. In the last six months, the company’s stock price increased by 24.27 percent. The company operates in Canada, Australia, Finland and Mexico. Agnico Eagle is among the largest gold producers in Mexico along with Newmont and Coeur Mining. 

Some experts believe that gold could end 2023 with a 20 percent cost increase. According to Eric Strand, Manager, AuAg Funds, prices could reach US$2,100/oz. “It is our opinion 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 percent higher and we also see miners outperforming gold with a factor of two,” Strand said.