Will gold hit $3,000 an ounce in 2023? That’s the question a lot of investors have been asking lately. 

With the recent climate plaguing the financial markets, more and more investors are turning back to gold. Global uncertainty remains high. The war between Russia and Ukraine continues to ravage the European continent, the pandemic doesn’t seem to be going away either this winter. Global inflation levels are still rising with inflation in Canada soaring to levels not seen since the 1980’s as reported by Toronto Star.

The current environment for the precious metals has led some analysts to forecast gold reaching USD $3000/oz in 2023. As mentioned in Kitco News, one such analyst which sits as the head of commodity strategy at a Danish investment bank Saxo Bank, Ole Hansen stated "2023 is the year that the market finally discovers that inflation is set to remain ablaze for the foreseeable future." Mr. Hansen further stated "Fundamentally, a war economy is inflationary and we expect investors to realize in 2023 that central banks are not going to be able to keep inflation under control."  Mr. Hansen predicts that gold prices will retest its previous high of USD $2,075 and continue to rally, hitting USD $3,000 per ounce, a 60% move from the current price of USD $1845 on January 3rd at the time of writing.

In a World Economic Forum paper authored in November 2022, it discusses the rise in demand for gold in 2022. Driven by a flight towards safer assets amid soaring inflation, and the role of central banks in this trend, it was stated that the demand for gold had risen by 28%. Turkey was the biggest buyer of gold in 2022, buying a total of 31 tons, or equivalent to almost 1,000,000 ounces of gold in Q3. This brings Turkey’s total gold reserves to 489 tons. Uzbekistan (26.13 tons) and India (17.46 tons) round out the top 3 buyers followed by Qatar and Mozambique. The buying could have indeed been more aggressive as not all central banks report their purchases and could potentially be hiding behind vails of secrecy.

In 2022, central banks across the globe have been accumulating gold at a pace not seen since 1967 when the US Dollar was backed by gold. The thesis is that gold is an effective inflation hedge over long periods of time. And so, if this thesis is the driver of the recent central banks buying, it would stand to reason that there will be a consistent bid in the market for the coming year.  

After peaking at USD $1923 in September 2011 at the height of it’s previous bull market, gold then sold off almost 50% and then consolidated from June 2013 to June 2019 as the price spent 6 years in a $400 dollar range. During that time, many projects died, funding dried up and the industry went in to stealth mode. But since June 2019 as the price broke above $1400, gold has been in a bull market.

With price appreciation since 2019, there has been renewed interest in the funding of exploration projects and resource expansion.

Gold reserves have steadily been declining for over 30 years now and there has not been a meaningful replenishment of in-situ assets. Even in the decade long bull market from 2001-2011 and exploration budgets exploding, the demand for gold has clearly been strong. The fact is, per S&P Global Market Intelligence, research indicates that only 28 out of 341 deposits globally were discovered in the past decade, containing just 171.8 Moz, or 6% of all gold discovered since 1990.

Even with the continued commitment of exploration dollars, it is not reasonable to think that reserves are going to be replenished any time soon. Fact of the matter is that of the 171.8 Moz contained in the 28 discoveries made over the past decade, 67%, or 114.6 Moz, is contained in the 10 largest deposits. It is vital for the industry to make large, 2Moz or larger deposits to replenish reserves.

Compounding the lack of large discoveries is the continued delays companies encounter on the road to production. for example, the largest new project coming down the pipe is Vale SA's Hu'u at Onto in Indonesia, the 13th-largest discovery since 1990, containing 27 Moz of gold. A prefeasibility study is under way at Hu'u, where results were originally expected in 2019; Vale continued to list the asset as in prefeasibility as of April 2022.

S&P Global Commodity Insights stated that their research into the gold production pipeline shows future supply growth, if any, will be relatively minor over the next decade, with even the most optimistic view showing gold production declining by 2028. Although there are several reasons for this, a contributing factor is a lack of quality assets available for development. While nearly half the discoveries included in the analysis are not yet in production, only 33 have over 10 Moz of gold in reserves and resources — enough for a mine to produce over 200,000 ounces per year of gold over a significant mine life. But many of these assets have a long road to production, including feasibility studies and permitting, making them unlikely to have a near- or medium-term impact on the pipeline.

So if the central bank bids keep coming in and demand stays strong not only this year but for the coming years while the supply side for gold remains tight with not material reprieve in sight, it seems completely reasonable to think that the price of gold will trend towards USD 3,000.