Gold prices could soar to $4,000 an ounce in 2023 as interest rate hikes and recession fears keep markets volatile, said Juerg Kiener, managing director and chief investment officer at Swiss Asia Capital.
The price of the precious metal could reach between $2,500 and $4,000 sometime next year, Kiener told CNBC’s “Street Signs Asia” on Wednesday.
There’s a good chance the gold market will see a major move, he said, adding that “it’s not just going to be 10% or 20%,” but a move that “will actually make new highs.”
Kiener explained that many economies could experience “a bit of a recession” in the first quarter, which would lead many central banks to slow the pace of rate hikes and make gold immediately more attractive. He said gold is also the only asset held by any central bank.
According to the World Gold Council, central banks bought 400 tonnes of gold in the third quarter, nearly doubling the previous record of 241 tonnes during the same period in 2018.
“From [the] 2000s, the average performance [on] Gold in any currency is somewhere between 8% and 10% a year. You haven’t achieved that in the bond market. You haven’t achieved that in the stock market.”
Kiener also said investors will look to gold with inflation remaining 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, disagreed that prices could more than double next year.
“I don’t have a price target of $4,000, although I would love to see it there,” he told CNBC’s “Street Signs Asia” on Thursday.
Polcari argued that gold prices will see some pullback and resistance at $1,900 an ounce. Prices will be determined by how inflation responds to interest rate hikes worldwide, 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 price target on it.”
Gold rallied on Tuesday as the U.S. dollar weakened after the Bank of Japan adjusted its yield curve control policy. The announcement sent gold prices up 1 percent above the key $1,800 level, before falling lower on Wednesday as the dollar recovered.
China is a big buyer
Asked if supply is low because of high demand, Switzerland’s Asia Capital’s Kiener said “there’s always supply, but maybe not at the price you want.”
But the high prices are no match for buyers in China who are paying a premium for the precious metal, he said.
Earlier this month, China’s central bank said it added about $1.8 billion worth of gold to its reserves, bringing the cumulative value to about $112 billion, Reuters reported.
“Asia has been 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 is a “relevant strategy” that will start in 2023.
“Gold has also traditionally been inversely related to inflation and has been a good hedge against inflation,” Kamath told CNBC on Wednesday.
“If you look at how much gold you needed to buy a normal house in the 70s, you probably need the same or less gold today than you did in the 70s, or the 80s, or the 90s” , he added.