Should I Invest In Precious Metals In 2023?
25 April 2023
As economies struggle to stay on the rails, consumer prices spiral out of control, and geopolitical turmoil reaches higher levels of uncertainty, demand for precious metals steadily rises with no signs of slowing down. These legitimate concerns drive everyone towards alternative assets for a hedge against inflation.
And upon seeing the writing on the wall, retail investors, institutional investors, and even central banks can't get enough of these physical assets to prepare for the economic horror show that may be just around the corner.
With all that said, if you are keen on gaining control over your savings while still protecting against the threat of inflation, here are the top reasons 2023 is the perfect time to invest in precious metals like gold and silver.
Reasons To Invest In Precious Metals In 2023
1. Gold is Rising in Value
The price of gold increased by 14% from November 2022 through February 8, 2023. Investors predict that gold could top out at a record $2,100 an ounce in 2023, and silver could jump more than 50% to reach $38 an ounce this year. Also, despite the current market volatility and a slow start this year, gold and silver prices continue to outperform and are maintaining an upward trend that may reach historic highs.
Analysts at Australia New Zealand Bank (ANZ) had this to say regarding their outlook on gold last February 9:
"Gold is benefitting from a weakening USD and expectations of the Fed tapering its monetary tightening. Inflation is still well above the Fed's target range of 2%, and the dollar's direction could reverse with any hawkish comments from the central bank. We expect a price correction in the short term."
2. Decreasing Dependence on the US Dollar
Current economic dynamics and geopolitical risks have accelerated the trend of moving away from the US dollar. Thus, from Brazil to Southeast Asian nations, more and more countries are calling for the use of other currencies in trade besides the US dollar.
This "de-dollarization" (reducing reliance on the dollar) initiative has resulted in a decline in the global trade of the US dollar. Precious metals, especially gold, are tangible and finite assets that can provide stability during economic downturns, inflation protection, limited supply, and high demand.
Despite this decreasing dependence, however, other major currencies like the Euro, Yen, Pound, and Yuan are highly unlikely to take over the reserve currency role of the US dollar. IMF data shows that the US dollar continues to retain its dominance in global forex reserves despite the 70% decrease in its share in central banks' foreign exchange reserves since 1999.
When confidence in the dollar wanes and uncertainty grows, investors flock towards the neutral and safe asset of gold and other precious metals. This is a recurring trend similar to the years leading to the Nixon Shock of 1971, where countries like France began to exchange dollars for gold when they realized that the US dollar was overprinted to fund the Vietnam War and the Great Society welfare programs.
Global central banks transitioned from net gold sellers to net buyers in 2010. In the first quarter of 2023, it was reported that Singapore added the most gold to the country's reserves, 45% higher than at the end of 2022. China, Turkey, India, and the Czech Republic also added to their gold reserves over the same period.
3. Silver May Perform Better Than Gold
The growing demand for silver paired with its limited supply means analysts expect it to perform better than gold this 2023 and potentially close the gap with it as well. Furthermore, this rising demand is predicted to increase substantially in the near future due to its increasing applications in the electronics, automotive, and renewable energy sectors, given that silver is the most conductive metal for heat and electricity.
The historical price ratio between silver and gold suggests that silver is currently undervalued in relation to gold. Throughout history, the gold-to-silver ratio has fluctuated, often favoring silver during certain periods. This historical precedent implies that there is a potential for a reversion to the mean, wherein silver prices catch up and outperform gold.
4. Worldwide Tensions
The intensifying Russia–Ukraine war is posed to introduce greater uncertainty and instability in the global economy that may, in turn, result in investors gravitating towards precious metals like gold to preserve their wealth. In addition, many countries, such as Turkey and Argentina, are currently facing high inflation rates, which can cause people to diversify their portfolios with precious metals.
If you're waiting for the perfect opportunity to invest in precious metals, you're in luck. As outlined above, several factors point to these safe haven assets being successful investments and outperforming the general markets this 2023. And to help protect your new precious metal assets, consider storing them in a secure gold and silver vault in Singapore.
At The Reserve, we keep your precious metals and other assets under lock and key so you can grow and preserve your wealth to tide over economic downturns. Apart from high-security safekeeping, our diverse tenant mix lets you access premier alternative asset services such as authentication and collateralization of precious metals and digitization for transparent asset tracking.