Gold's rally will continue into 2023, these 3 indicators reveal why - Alain Corbani
Despite its lackluster performance in 2022, gold has recently seen a surprise rally, with its price rising 16.9 percent over the past three months. This rally will continue into 2023, according to Alain Corbani, Portfolio Manager at the Gold & Precious Fund.
Corbani, who has three decades of experience in senior financial roles, including as a Director of RBC Capital Markets, said that three factors affect the gold price. These are inflation, the U.S. dollar’s strength, and the Federal Funds rate. Since they’re all either stalling or reversing, the gold price has been moving up, he said.
“All these three key data have started an inverted move,” he observed. “They stopped peaking and are heading south… We had a rebound in the price of gold because the data coming from the inflation front, the U.S. dollar weakening, and the interest rates going down, all triggered a new interest in the price of gold.”
Gold is currently trading near $1,930 per ounce.
Corbani spoke with David Lin, Anchor and Producer at Kitco News.
Real Interest Rates and Gold
In addition to the three factors he mentioned, Corbani said that gold prices are also influenced by real interest rates. The real interest rate is the difference between a nominal interest rate and inflation.
“Two variables that are strongly negatively correlated to the price of gold are real interest rates and the U.S. dollar,” he claimed. “If I have a clear vision on the direction of real rates, and on the direction of the U.S. currency, then I can make a call on the price of gold.”
Rising interest rates make gold less attractive to investors compared to coupon-bearing assets like bonds. He also hinted that inflation weakens the U.S. dollar, which is traditionally considered a safe-haven asset. If investors eschew the dollar as a hedge, they turn to gold.
“When things go in the wrong direction, usually the safe-haven asset is the U.S. dollar, and otherwise it is gold,” he stated. “When there is a lot of stress in the markets, gold will be penalized.”
To find out Corbani’s price forecast for gold, watch the video above
Follow David Lin on Twitter: @davidlin_TV
Follow Kitco News on Twitter: @KitcoNewsNOW