2022-23 New Year's Eve Gold Investment Opportunities Outlook

2022 is coming to an end. This article will track and review the trajectory of gold this year. Using history as a mirror, we can know the ups and downs. Before the new year is approaching, review the old and learn the new, and start again.

Review of key events in 2022

Event 1: Russia-Ukraine Conflict

Cause: War broke out between Russia and Ukraine over territorial issues.

Time: From February 24, 2022

The final result: a global energy crisis is caused, which directly leads to higher inflation, and the price of gold soars due to hedging.

Energy Crisis—Because of concerns that Russia will cut off energy supplies to Europe, the prices of natural gas, oil and other energy sources rose sharply after the outbreak of the war. The impact of high energy prices has since spread to other areas of the economy, pushing up transportation costs and food prices, which eventually led to higher inflation in many countries around the world.

Inflation - Ukraine is the breadbasket of Europe, and its corn and wheat exports account for more than 10% of the world. The war situation has caused the export of Ukrainian agricultural products to decrease, the price has soared, and the price of valuable energy has also risen, which eventually caused the inflation level of many European countries to hit new highs.

Gold soared - due to the war, Russia and NATO faced off for a while, causing panic about the expansion of the geopolitical situation. Secondly, with the sharp rise in crude oil prices and the record highs of inflation, gold has become an important hedging tool, and it has ushered in a short-term bull market driven by continuous funds.

Gold performance: from 1837 points on February 17, 2022 to 2070 points on March 1, 2022. Price volatility: $232, cumulative total increase: 10.8%.

Event 2: The Fed raises interest rates

Cause: In order to curb the high level of inflation in the United States, the Federal Reserve started the most intensive interest rate hike cycle in 41 years and tightened liquidity in an all-round way.

Time: Beginning in March 2022

The final result: U.S. stocks plummeted across the board, the U.S. dollar soared, and gold started a top-down mode.

U.S. stocks plummeted—since the Federal Reserve began raising interest rates and shrinking its balance sheet, hot money in dollars quickly withdrew from the capital market, causing the three major U.S. stock indexes to plummet.

The U.S. dollar soared-the interest rate hike led to an increase in the cost of U.S. dollar borrowing. At the same time, under the pressure of the Federal Reserve, other major central banks except Japan have entered into a wave of interest rate hikes. When global liquidity is tightening, the safe-haven value of the U.S. dollar Highlights that the U.S. dollar index ushered in a big bull market.

Gold plummeted—the interest rate hike led to the scarcity of US dollars in the market, and the price of the US dollar rose. Market investors sold gold and switched to US dollars, causing gold to start a mighty plunge.

Gold performance: Since March 1, gold has fallen from 2070 points all the way to 1614 points on September 28, price fluctuation: $455.64, cumulative total drop %: 22%.

Gold Investment Outlook 2023

Fundamental analysis:

1. Long-term outlook

From 2020 to the present, although the uncertainty of the environmental impact of the epidemic has begun to decrease, international fringe conflicts are still being staged, a series of influencing factors such as the fragmentation of the globalization system, and the strong dollar policy have brought about a direct result that the economy has entered a depression stage from recession. From a historical point of view, gold prices are often prone to blowout rises at this stage. With the change of the US economic strategy in the later period, gold is expected to follow the economic cycle and rebound again.

2. Mid-term outlook

From the perspective of medium-term supply and demand, gold has become a turning point in this financial turmoil. Russia is eager to consolidate the binding properties of the ruble and energy. When Europe and the United States will also establish a new energy supply chain relationship, Russia will hoard a large amount of gold in addition to "de-dollarization" as an endorsement for the ruble. Therefore, in the medium term, the future demand for gold will increase significantly, thereby stabilizing the further upward movement of gold prices.

3. In the short term

From the perspective of short-term investment preferences, the conflict between Russia and Ukraine and the Fed’s aggressive interest rate hikes have made the currency credit of various countries shaky, and the essence of gold’s rise and fall is credit hedging. When countries (especially the United States) appear on the currency level Credit crisis, as ordinary investors, even the public, will take the initiative to exchange their currency into gold to avoid risks, which will directly reflect on the price of gold.

Technical analysis:

From a technical point of view, at the beginning of the year, gold started to fall after building an M-top at the 2000-point line, and then at the end of the year, it obtained a W-bottom at the 1620-point line. If the breakthrough of 1800 points is completed before the end of 2022, the upward attack in the 1870-1900 area is expected to start, and the price cycle of an economic cycle will be completed since then. However, if 1800 is not broken for a long time, the bullish trend will be difficult to go further. It cannot be ruled out that there will be a return to the downward trend again, and it will re-explore around 1700-1650