Safe Haven Demand Should Keep Gold Elevated Through 2023

Despite any short-term technical pullbacks, that status of gold as a safe haven asset should keep it elevated through the rest of 2023. As such, now could be as good a time as any to get exposure to the precious metal.

Recent geopolitical events and high inflation that could potentially cause a recession. But gold’s ability to preserve value is coming back to the forefront. This has been the impetus for elevated demand for the precious metal this year.

“Gold has been a hot commodity in 2023. The strong demand for the precious metal is likely to continue throughout the rest of 2023 and into 2024,” a CBS News report said. “With the price of gold being beholden to the law of supply and demand, that means now is a great time to dive into the commodity.”

“Inflation has cooled off but the Fed’s overall progress in the battle to tame higher costs has slowed in recent months,” the report added, noting that gold “has historically been known for the help it can provide during inflationary periods by keeping [its]value (or even seeing an increase) when the purchasing power of the dollar has fallen.”

As mentioned, prospective investors of the precious metal need not worry about any short-term fluctuations in prices. The long-term horizon tends to fundamentally tilt toward bullishness in the metal.

“Safe-haven demand will continue to drive gold higher after a slight period of consolidation. We believe geopolitical tensions and the uncertainty in the Middle East will continue to drive prices higher,” said David Meger, director of metals trading at High Ridge Futures, per a Reuters report.

Chinese Demand Buoys Gold

China’s voracious appetite for the precious metal should also help buoy prices. The second largest economy is parrying Western sanctions by using the mtal as a currency management tool and a potential catalyst for global financial control.

“China and others (like Russia) have employed gold to mitigate the impact of USD weaponization and potentially exert influence on the global financial system,” a Sprott report noted. “Gold is critical for China’s currency management due to external selling pressures and its longer-term goal to internationalize the RMB. China’s commitment to bolstering its gold reserves has been unwavering throughout the past decade, driven by China’s need to enhance its economic and geopolitical standings.”

Investors seeking exposure to the metal may want to look at the Sprott Physical Gold Trust (PHYS), which provides an enhanced physical bullion structure, offering the ease of purchase and sale that comes with being traded on a stock market exchange. The fund provides exposure to the precious metal without the logistical challenges of storing the metal. But, shares are redeemable for physical bullion if the investor wants a more tangible investment option.

An alternate play on rising prices is through ancillary gold services like mining or more specifically, the Sprott Gold Miners ETF (SGDM). The ETF seeks investment results that correspond generally to the performance of the Solactive Gold Miners Custom Factors Index, which tracks the performance of larger-sized gold companies on Canadian and major U.S. exchanges.

For more news, information, and analysis, visit the Gold/Silver/Critical Materials Channel.