January 2023 Market Update

Precious Metal Prices 

Gold started 2023 on a strong footing as the price continued to increase steadily in the opening days of January. After breaking the $1,800 barrier in the closing days of 2022, the price only briefly dropped back below $1,800 just before Christmas, before continuing a rally which carried on into 2023. By January 9, the price was close to breaking the $1,900 barrier and closed at $1,878.85 on PM trading. Although prices remain strong, markets are still awaiting more cues regarding US monetary policy ahead of an upcoming speech by Federal Reserve Chair Jerome Powell, as well as key inflation data which is likely to have an ongoing influence in the months ahead.

Although inflation is still trending above the annual target range, there is promising initial data from the US regarding a potential slowdown of interest rate hikes. This suggests to some that price pressures in the US have peaked and will result in a less hawkish stance from the Fed in the coming months. As January currently stands, gold has risen nearly 2.4% between January 3-9.

Subjectively speaking, silver is performing less favourably in 2023 so far, as the price has decreased from $24.29 on January 3 to $23.85 on January 9. This represents a decrease of 1.83% in the first few days of trading. However, since the start of December 2022, silver has increased from $22.13 to $23.85 – a rise of 7.7%. Although gold is currently shining and performing well, it has only risen by 4.19% when measured over the same period.

Silver prices continue to be slowed by weaker than predicted industrial demand. Although prices for PGM metals such as platinum are also closely linked to industrial demand, prices for platinum continue to rebound strongly. This trend has been linked to a recovery in vehicle catalyst demand coupled with various international supply challenges.

Global Growth Outlook 

Towards the end of 2022, multiple market commentators including Barclays, Credit Suisse and MKS PAMP released reports which detailed their outlook, forecast and projections for the year ahead. Across many of these reports, the predication for 2023 was aligned, with Barclays in particular suggesting that ‘next year will be a long, hard slog’, citing the ongoing Ukraine war, the energy crisis across Europe and a lack of growth, coupled with an increase in inflation as being the key drivers.

However, although many of the same limitations were suggested by MKS PAMP, its view of gold in 2023 was that it would be heading up. This increase was suggested to be driven by the continued strong physical demand in India, China and Asia, as well as a very strong demand for coins and bars in the retail market. These factors were said to have provided a foundation in previous months that will continue to provide support in the months ahead. They go on to suggest that slower economic growth, inflation and deglobalisation ensure that gold will continue to act as a diversifier in times of escalating uncertainty.

For 2023, PAMP predicts that, due to the factors suggested, the average base price forecast would be around $1,880/oz, with a ‘bullish’ prediction of up to $2,300/oz if sustained market volatility and a weaker USD occur, as well as an increase in Asian physical gold demand.

PAMP also suggests that silver could upstage gold in 2023. This suggestion was largely because demand for silver posted a deficit in 2022 of around 150mn oz, the first after many years of surpluses. Similarly, silver is said to have less readily available physical stocks than gold because COMEX holdings are at a two-year low, LBMA vaults are at 2016 lows and growing industrial demand and premiums remain high.

Its silver price prediction for 2023 offers an average price of $22.50/oz, with a bullish outlook of around $30/oz.

Indian and Asian Demand 

Physical gold demand in India was said to have slowed towards the end of 2022 and in the opening days of 2023, despite the holiday period, which would traditionally result in higher demand. The recent price increases meant that domestic prices in India are at their highest levels in nearly 10 months, with bullion dealers suggesting that buyers were not ready to purchase at the current levels. This lack of demand resulted in dealers offering discounts of around $26 per ounce over official prices in an attempt to entice buyers.

Although the slow pace of sales seen in India is also prevalent in China, it is predicted that demand will pick up towards the end of January as the Chinese New Year celebrations traditionally see a spike in gold purchases. Independent analyst Ross Norman said: “Being the Year of the Rabbit, we move from the unpredictability of the Year of the Tiger to one of caution and self-protection, which should auger well for gold.” 

A similar outlook was predicted by the World Gold Council. In its last market update for China in 2022, it suggested that gold continued to dominate China’s jewellery market as the easing of Covid restrictions painted a bright picture for the future. One of the key points was that Chinese consumers are now paying increasing attention to gold jewellery as a financial asset, with many continuing to turn to gold in key holiday seasons, which continues to boost demand in the region.  

Central Banks 

It was recorded that, during 2022, central banks globally amassed gold reserves at a pace last seen in 1967, when the US dollar was backed by gold and central banks bought more than 1,400 tonnes of gold. However, since 1971 – when the US abandoned the Bretton Woods Agreement – the purchases of gold gradually diminished. The first nine months of 2022 saw purchases amounting to 673 tonnes, something which lifted global gold reserves to their highest level since 1974.  

Although we won’t know the true extent of total central bank gold holdings and purchases during 2022 until the World Gold Council publishes its Gold Demand Trends Report towards the end of the month, we do have preliminary data from the WGC suggesting that the People’s Bank of China reported an increase of 32 tonnes in November. This amounts to the first recorded increase in their reserves since 2019 and may mark a significant change in direction. Similarly, as reported in previous months, the Central Bank of Turkey continued to add to its reserves with increases of 19 tonnes in November. This recent purchase meant that the YTD total purchases by Turkey amounted to 123 tonnes – the largest recorded by any country. 

The Royal Mint  

The Royal Mint has revealed the first commemorative coins for 2023 to feature His Majesty The King’s official coinage portrait. The release of the 2023 Annual Set is the first chance for collectors to own a set of 2023 dated coins featuring the effigy of King Charles III. Celebrating key events and anniversaries throughout the year, our Annual Sets bring milestones to life on a £5, £2 and 50p coin.  

CEO Anne Jessopp said: “The Royal Mint has an official duty to strike the coins of the UK monarchs and has been responsible for doing so since the reign of Alfred the Great. We were the first mint to reveal the effigy of King Charles III in September 2022 and, as Deputy Master of the Mint, I am honoured to unveil the first collection of 2023 coins featuring the effigy of The King as we cement our role in history with this next chapter in British coinage.” 

All new coins struck from January 1 2023 will feature the new coinage portrait.