Gold prices to push back above $1,900; its only a matter of time before a recession hits - Haywood Securities
In their 2023 outlook, market analysts at Haywood Securities said that they see a recession as inevitable as the U.S. bond yield curve remains inverted, with the spread between two-year and 10-year bond yields at its widest point in four decades. They added that this indicator "does not bode well for the soft-landing narrative that the Fed is peddling."
In this environment, the analysts said that they continue to expect gold to outperform equity markets.
"Despite current market volatility, gold has been a source of relative stability recently and continues to offer investors a safe haven in times of turbulence," the analysts said in their report. "Thus, we believe gold to be less risky compared to other speculative areas of the market."
The Canadian-based investment firm, with assets under management of more than C$15 billion, said that it sees gold prices averaging 2023 around $1,945 an ounce, up 2.4% from their previous estimate. At the same time, the analysts said that they see prices averaging $1,975 an ounce in 2024.
The analysts are also bullish on silver as they expect prices to average the year around $24.31 an ounce. The average price is expected to increase to $24.69 an ounce in 2024.
After their best start to the year in a decade, gold and silver have struggled to attract new investor attention this month. Currently, gold prices are holding neutral ground, around $1,850 an ounce. At the same time, silver prices are trying to hold support above $21.50 an ounce.
Looking ahead, Haywood added that higher gold prices through the next two years should continue to support the mining sector.
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"Our forecasts for a modest increase in gold and silver prices consider a weakening USD outlook over the next two years are expected to at least partially offset inflation and position the sector with an attractive platform in which to protect operating cashflow and deliver yields to shareholders," the analysts said. "Given the cash generation that the mining sector is furnishing, we believe that sector consolidation will continue as company balance sheets are used to augment asset bases for resource and or production expansion."
With a focus on organic growth, the firm said that its top intermediate and junior producers are Calibre Mining, Equinox Gold and Karora Resources.
The firm's top picks in the exploration sector are Amex Exploration, Dolly Varden Silver Corp, Filo Mining Corp, and Osisko Mining Inc.