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It is prudent to be diversified in 2023 and that includes holding some gold - business school professor

Kitco News

Welcome to Kitco News' 2023 Outlook Series. Uncertainty continues to dominate financial markets as central bank monetary policies push the global economy into a recession to cool down inflation. Stay tuned to Kitco News to learn from the experts on how to navigate turbulent financial markets in 2023.

(Kitco News) - Gold's break above $1,850 at the start of the new year is creating new momentum for the precious metal and could attract some new investors' interest, according to one university professor.

In a recent interview with Kitco News, Greg Harmon, creator of Dragonfly Capital and a professor of banking and finance at Case Western Reserve University's business school, said he is bullish on gold's long-term potential as the price tests new resistance around $1,880 an ounce.

Harmon added that gold's technical picture has been solidly bullish since prices bounced off the November 2-year lows at $1,618 an ounce.

Adding to gold's bullish technical outlook, Harmon said that he expects financial market uncertainty to continue to support the precious metal's safe-haven appeal.

He added that markets are on the cusp of a paradigm shift as bond yields continue to trade near their highest level in 12 years, holding support above 3.50%.

"The one thing that continues to stand out for me is that we have been a bull market for bonds for 35 years. It really felt to me that 2022 changed that; we are seeing a secular change in bonds. We don't know the implication of this shift because everybody that is investing right now has only lived in an environment where bond prices go up," he said.

Harmon added that the risk is that the correlation investors have seen over the last 30 years starts to break down.

"There is a strong case to be made that gold will be an attractive asset in this unknown environment," he said. "If you don't know how things will be correlated, then maybe you need to spread your money out."

Gold prices to hold steady around $1,880 through 2023 - MKS PAMP Group

As to how much gold an investor should have in their portfolio, Harmon said that 1% to 2% could be appropriate. He added that he doesn't see gold as a traditional inflation hedge, as its price is driven mainly by investor demand.

"Gold gets its value because people want it, so it is still prudent to limit your exposure," he said.

Along with gold, Harmon said that he also sees some potential in silver as prices have seen a significant rally from the October two-year lows.

He added that there is a lot of resistance around $24 an ounce and then at $26 an ounce. However, if prices get above $30, silver has a shot at testing its all-time highs.

"Silver has a lot of momentum and we haven't seen it stall like gold; if it can get above $25, it could signal a long-term reversal," he said. "If silver gets to $30, there is not a whole lot stopping it from going higher."

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.