We are undoubtedly in a period of economic uncertainty. The world has changed massively in the last few years, with the global pandemic at the centre of these changes. The global economy has still not recovered from these changes, and there are few signs of recovery.
This is causing uncertainty in the stock market and in currency prices, leading many investors to look to gold as a way to protect themselves in the near future. Will the price of gold continue to increase? Let’s take a deep dive to find out.
The Safe Haven of Precious Metals
The economic changes of 2022 have definitely had an effect on the price of gold and other precious metals. In times of uncertainty, people often look to precious metals as a way to protect themselves and their investments from fluctuations in the stock markets. The effect of inflation across the globe has helped drive the demand for physical gold and other precious metals, steadily pushing up the prices.
There is no light at the end of the economic tunnel, as yet. Global conflicts such as the war in Ukraine and its impact on the cost of energy, is making it harder to see very far into the financial future.
In the near term, many experts can see a continuing high inflation, slowing of the global economy and stagnation in the stock markets.
The experts at Physical Gold have had a busy 2022 and can look forward to that continuing into the next year and beyond. They help investors big and small buy physical gold, including gold bars and coins, as an investment for their future. They have experienced a surge in demand for gold and the other precious metals they offer as inflation has continued its rise and financial uncertainty across the globe has remained.
Diversify to Survive
When markets become unpredictable and people look to diversify their investment portfolios to spread risk, gold is one of the first places they go due to its history as a safe haven asset. The increased pressure to diversify investments has helped keep gold prices strong throughout 2022 and shows no signs of slowing. Many people saw the first small rises in interest rates as a sign that demand for gold and other precious metals would ease. Now, central banks around the world are expected to slow the increase in interest rates which will put pressure on currencies.
Both the US Federal Reserve and the Bank of England are expected to slow or even stop their increases in interest rates in 2023. This helps to maintain the demand for gold and helps to project further growth in demand and gold prices for the foreseeable future. Gold is always a safe haven in times of uncertainty and a great way to diversify investment or hedge against risk. These are some of the key drivers of the demand for physical gold which is keeping the price high.
There are never any guarantees in investments, but it does seem likely that gold will hold its price and even rise at least for the first half of 2023 and possibly beyond. The continuing conflict between Russia and Ukraine will also continue to bolster the price of gold, as it is not just economic uncertainty that can impact its price.
Recession with No Signs of Recovery
The global economy has not recovered from the effects of the pandemic, and there are no signs of recovery around the corner. Most economists expect the current trends to continue, and many of the biggest drivers of the economic growth we have enjoyed since the turn of the century are under increasing pressure. China, for instance, is struggling economically and demographically while also feeling the strain of its ‘zero covid’ policies.
China has been a powerhouse of production, helping the global consumer economy grow with its ability to produce high volumes of low-cost consumables as well as high-tech products. The effects of the pandemic and the Chinese government’s reactions to it have drastically cut its production capacity. This paired with economic sanctions placed on Russia and countries it does business with, such as China, has had a hugely negative effect on China’s place as the workhouse of the world.
This is increasing the cost of many products. Price rises that were initially thought to be caused by supply chain issues are now looking like the result of greatly reduced production numbers in China. The large-scale lockdowns have prevented the country from maintaining its output. Even if the Chinese government makes sweeping changes to its zero covid policy, the rise in energy prices will increase its costs across the board. There is no quick fix to these problems, and the economic strains they create are helping to keep the price of gold up with no signs of slowing or stopping.
The price of gold has risen sharply in the past year, and this trend looks set to continue in the face of increasing economic turmoil and uncertainty. Conflicts across the globe, stress on supply chains, and stagnant stock markets are only going to increase the price of gold in 2023 and beyond.
