Investing.com – It could rise to $4,000 an ounce in 2023, said Jörg Kenner, managing director and chief investment officer at SwissAsia Capital, as rising interest rates and recession fears keep markets volatile.
The price of the precious metal could reach between $2,500 and $4,000 sometime next year, Kenner told CNBC’s Street Science Asia on Wednesday.
There’s a good chance the market will see a big move, he said, adding that “it won’t just be 10% or 20%,” but one that “will really make new highs.”
Keener explained that many economies could experience a “bit of a recession” in the first quarter, which could result in many central banks slowing down the pace of interest rate hikes and immediately making gold more attractive. He said that gold is the only asset that every central bank owns.
According to the World Gold Council, central banks bought 400 tons of gold in the third quarter, nearly double the previous record of 241 tons during the same period in 2018.
And “Since the 2000s, the average return on gold in any currency has been somewhere between 8% and 10% per annum. And you haven’t made it in the bond market. You haven’t made it in the stock market.”
Kenner also said that investors will be looking to gold as inflation remains high in many parts of the world. And “Gold is a good inflation hedge and makes a great catch during stagflation and a great addition to a portfolio.”
Despite strong demand for gold, Kenny Polkari, chief market strategist at Slatestone Wealth, disagreed that prices could double next year.
“I don’t have a price target of $4,000, although I’d like to see it go there,” he said on CNBC’s “Street Sciences Asia” on Thursday.
Polkari argued that gold prices will see some decline and resistance at $1900 an ounce. He said prices would be determined by how inflation responds to higher interest rates globally.
“I love gold. I have always loved gold,” he said. “Gold should be part of your portfolio. I think it will do better, but I don’t have a price target of $4,000.”
Gold rose on Tuesday as the US weakened after Japan’s central bank adjusted its yield curve control policy. The announcement also sent gold prices up 1% above the key $1,800 level, before falling on Wednesday as the dollar regained ground.
China is the largest buyer
When asked if supply was low because of high demand, Kinnear of SwissAsia Capital said, “There is always supply, but maybe not at the price you want.”
But he said the high prices were no match for buyers in China who pay a premium for the precious metal. Earlier this month, China’s central bank announced that it had added $1.8 billion worth of gold to its reserves, bringing the cumulative value to about $112 billion, Reuters reported.
Asia was a big buyer. And if you look at the whole trade, gold is leaving the West and heading to Asia.”
Tips for investors
Nikhil Kamath, co-founder of Zerodha, India’s largest brokerage, said investors should allocate 10% to 20% of their portfolio to gold, adding that it is a “relevant strategy” until 2023.
“Gold was also inversely proportional to inflation, and it was a good hedge against inflation,” Kamath told CNBC on Wednesday.
“If you look at how much gold you needed to buy an average home in the 1970s, you probably need the same amount or less gold today than you did in the 70s, 80s or 90s,” he added.