Commodities, including gold and silver, are predicted to be the best asset class in 2023 by leading global financial groups and research firms.
Stock market, however, is rated as a risky asset class this year.
The global crude oil market is projected to remain tight but balanced in 2023, with Brent price averaging $90 per barrel for the year, reports by Goldman Sachs and others said.
The reports predict OPEC pricing power limiting oil price downside in 2023.
“OPEC’s growing ability to raise prices without hurting demand too much will limit downside risks to the bullish oil forecast for 2023, the report by Goldman Sachs said.
The financial sector major said it sees global oil demand growth averaging 2.7 million barrels per day (mbd) in 2023, pushing the market into deficit in the second half, leading to firming up of Brent prices to $105/bbl by Q4.
JP Morgan, however, said it expected a relatively robust 1.3 mbd of oil demand growth next year, despite expectations for the global economy to expand at a sub-par 1.5 percent pace in 2023.
“Our forecast of a $90 Brent in 2023 centers on the view that the OPEC+ alliance will do the heavy lifting to keep markets balanced next year,” said Natasha Kaneva, head of global commodities strategy at JP Morgan.
The report by leading Indian commodity market research firm Prithvi Finmart rated gold, silver and industrial metals as the best performing commodities in 2023 due to weakness in the dollar index, possibilities of pause in Fed interest rate hike cycles and demand from China after reopening its economy.
“Gold and silver are my top favorites for 2023. I expect gold could cross $2000 per troy ounce and silver could also test $28-30 per troy ounce levels [this year],” Manoj Jain, Director of Prithvi Finmart, told Arabian Business.
Kedia Commtrade and Research, another leading Indian commodity market firm, said gold could benefit from a weaker dollar in 2023.
“In a reversal of the trend of the last 12 months, other currencies are expected to strengthen as the dollar weakens in 2023, largely due to monetary policy,” Ajay Kedia, managing director of Kedia Commtrade and Research, told Arabian Business.
“Further dollar weakness should lift the gold price with other factors such as the dovish tone from the US Fed, central bank buying, recession fear, attractive valuation for gold compared with other assets can drive gold smoothly towards $2100 [per troy ounce] this year,” Kedia said.
The firm’s report also projected prices of silver – billed as poor man’s gold – crossing $32 as industrial demand seems to be improving against the supply with dwelling inventories.
JP Morgan said there is good and bad news for equity markets and more broadly risky asset classes in 2023.
“The good news is that central banks will likely be forced to pivot and signal cutting interest rates sometime next year, which should result in a sustained recovery of asset prices and subsequently the economy by the end of 2023.
“The bad news is that in order for that pivot to happen, we will need to see a combination of more economic weakness, an increase in unemployment, market volatility, decline in levels of risky assets and a fall in inflation. All of these are likely to cause or coincide with downside risk in the near term,” Marko Kolanovic, chief global markets strategist, co-head of global research, JP Morgan, said in the report.
Morgan Stanley is bullish on Chinese assets in general in 2023 as the reversal of Covid curbs will boost economic activity and hence growth.
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