Gold prices could rise to $4,000 an ounce in 2023 as interest rate hikes and recession fears keep markets volatile, said Jürg Kiener, managing director and chief investment officer of Swiss Asia Capital.
The price of the precious metal could reach between $2,500 and $4,000 sometime next year, Keener told CNBC “Street Signs Asia” on Wednesday.
There’s a good chance the gold market will see a big move, he said, adding that “it won’t just be 10% or 20%” but a move that “will really make new highs.”
Keener explained that many economies could face a “mild recession” in the first quarter, which would slow the pace of rate hikes by many central banks and make gold instantly more attractive. He said gold is also the only asset any central bank owns.
According to the World Gold Council, central banks have been buying 400 tons of gold in the third quarteralmost doubling the previous record of 241 tonnes during the same period in 2018.
“From [the] 2000, average return [on] gold in any currency is somewhere between 8% and 10% per year. You haven’t achieved that in the bond market. You don’t get that in the stock market.”
Keener also said investors will look to gold as inflation remains high in many parts of the world. “Gold is a very good hedge against inflation, a great catch during stagflation and a great addition to a portfolio.”
Despite strong demand for gold, Kenny Polcari, senior market strategist at Slatestone Wealth, disagrees that prices could double next year.
“I don’t have a target price of $4,000 for it, although I would like to see it there,” he said on CNBC’s “Street Signs Asia” on Thursday.
Polcari argues that gold prices will see some pullback and resistance at $1,900 an ounce. Prices will be determined by how inflation responds to rising interest rates globally, he said.
“I like gold. I’ve always liked gold,” he said. “Gold should be part of your portfolio. I think it will do better, but I don’t have a $4,000 target price for it.”
Gold rose on Tuesday after the US dollar weakened afterwards The Bank of Japan adjusts its yield curve control policy. The message caused gold prices to rise 1% above the key $1,800 levelbefore falling on Wednesday as the dollar recovered.
China is a big buyer
Asked if supply was low because of high demand, Swiss Asia Capital’s Kiener said “there’s always supply, but maybe not at the price you want.”
But the high prices are not sitting well with buyers in China, who are paying a premium for the precious metal, he said.
Earlier this month, China’s central bank announced that it had added about $1.8 billion worth of gold to its reserves, bringing the total to about $112 billion. Reuters reported.
“Asia was a big buyer. And if you look at the whole trade, essentially gold is leaving the West and going to Asia,” he added.
Advice for investors
Nikhil Kamath, co-founder of India’s largest brokerage Zerodha, said investors should allocate 10% to 20% of their portfolio to gold, adding that it was a “relevant strategy” until 2023.
“Gold is also traditionally inversely related to inflation and is a good hedge against inflation,” Kamath told CNBC on Wednesday.
“If you look at how much gold you needed to buy an average home in the 70s, you probably need the same or less gold today than you did in the 70s or 80s or 90s” , he added.
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