With US inflation forecast by economists at Société Générale to decrease from 8.0% in 2022 to 4.3% in 2023, the impact on Gold via real rates should continue to be extremely bearish.

Headwinds gathering

“In 2023, we expect a Fed pivot toward more dovish policies, and the 10-year rate should gradually decrease. By itself, this is bullish for Gold. But we expect inflation to drop faster than rates from an average headline CPI of 8.0% in 2022 to 4.2% in 2023  As a result, we expect real rates to surge, driving down Gold prices sharply.”

“After Q3-23, Gold’s fortunes should reverse, as we expect a mild US recession in early 2024 and sluggish EU and China growth. Investors are likely to hedge such risks by transferring part of their allocations to Gold. At this point, we would expect the Fed to turn dovish again, with inflation somewhat under control, albeit higher than before COVID.”