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Commodities set to rally in 2023 as Fed tightening loosens - Will Rhind

Kitco News

(Kitco News) - Commodities, including gold, are set to rally in 2023 as the Federal Reserve's monetary stance loosens and a soft landing is in sight, according to Will Rhind, CEO of GraniteShares. He suggested that gold, which is up 5 percent this year, is telegraphing an optimistic outlook for markets.

"This year, we're talking about another bullish year for commodities markets," he predicted. "Now, we're getting to a point where… and the gold market is telling you this, that interest rate hikes are largely done. It is not saying that we've seen a peak, necessarily, but that the tightening cycle we've been in is largely over."

He added, "I'm reading it as [a soft landing]… recessionary fears are overblown."

Rhind has over two decades of experience in the financial sector, including senior roles at the World Gold Council and iShares. He spoke with David Lin, Anchor and Producer at Kitco News.

Fundamentals are strong

As China reopens from its strict COVID-zero lockdown policy, both supply of and demand for commodities are expected to rise. Rhind suggested that the net effect on price will be positive.

"They [China] opened pretty aggressively toward the end of last year," he observed. "Now that is causing a big uptick in the buying of commodities."

This, combined with better-than-expected economic performance in Europe, suggest that commodities will have a profitable year, concluded Rhind.

"Europe seems to be, despite a lot of fears, getting on with their situation, and over the worst of the energy crisis now," he claimed. "Actually, the European market outperformed the U.S. last year."

The DAX (Frankfurt Stock Index) lost 12.7 percent over 2022, while the S&P 500 was down 19.4 percent.

Rhind also said that a weakening dollar will make it cheaper to purchase commodities, and could boost demand for gold. The U.S. Dollar Index (DXY) is down 7.7 percent over the past 3 months. The DXY reached a peak above 114 in 2022.

"2022 was the year of the strong dollar," he observed. "This is the year of the weak dollar… that's a positive environment for gold."

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PGMs set to rally

Rhind's outlook for platinum is positive due to its use in catalytic converters in cars, along with increasing demands from policymakers to make vehicles more environmentally friendly.

Over the past two years, the platinum price rose by 2.2 percent while palladium, an industrial substitute for platinum, fell by 26.2 percent. South Africa and Russia are the world's biggest platinum producers, while palladium is mainly mined in Russia.

"I think the Russia-Ukraine situation may have changed [the market]," said Rhind. "Now there is an ESG component to it… why source palladium from Russia, when you can get platinum from South Africa for a lot cheaper?"

He added that this would be an "accelerant" in the market that would "sway demand" towards platinum, leading to "a big rally in the platinum price."

To find out Rhind's prediction for the best-performing commodity in 2023, watch the video above.

Follow David Lin on Twitter: @davidlin_TV

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