Emirates: Gold prices will sustain an upward trend and are expected to cross the psychological barrier of $2,000 per ounce this year as interest rate hikes and recession fears keep markets volatile, experts say.

Analysts and industry executives said there is a high demand for gold bars, coins, and jewellery as central banks, corporates, and individuals are looking for investment and saving options in an era of rising inflation and an uncertain global economy.

Wayne Gordon of UBS Global Wealth Management said gold is expected to break the $2,000 level by the end of 2023.

"The US dollar is showing signs of weakness now, and gold will continue to be a 'very good hedge' against the weakness in the greenback," he said.

Beginning of a rally

On Friday, gold prices rallied again and recorded the first rise in the past five weeks as a pullback in the US dollar and Treasury yields alleviated concerns of more Federal Reserve rate hikes.

Spot gold climbed to $1,845.84 per ounce, its highest in over two weeks. US gold futures were up 0.7 per cent to $1,853.70 per ounce in New York.

Last time, gold prices approached record levels of over $2,000 per ounce in February 2022 at the onset of the Russia-Ukraine conflict. In January, yellow metal rose from $1,860 an ounce to a peak of around $1,960 an ounce.

Safe-haven investment

Analysts said gold's long-term stability is its greatest value to investors, particularly in a volatile economic environment. The yellow metal, which enjoys a safe-haven status, is often seen as a hedge against inflation and a storage of value.

"Being a value-appreciating commodity, we can assume with high confidence that the price of gold will only be going up in the near future. Even though there has been volatility in prices due to numerous socio-economic effects around the globe, the general trend in price has witnessed an upward slope," Shamlal Ahamed, managing director for international operations at Malabar Gold and Diamonds, told Khaleej Times on Sunday.

He said the ever-increasing demand for gold in the market, amongst both the older and younger audience, is a testament to the fact that gold continues to hold its position as a safe-haven investment.

In reply to a question, he said jewellery sales for the first couple of months of 2023 have been going well.

"There has been a sustained demand in the market for jewellery, and we have continued to roll out new designs and collections to cater to the varying preferences of our customers. We expect this trend to continue as the festival season and vacation is fast approaching, which generally means an added influx in customers wanting to purchase jewellery," Ahamed said.

John Paul Alukkas, managing director for international operations at Joyalukkas Jewellery, also echoed similar views last week and said gold is set to continue its upward trend this year.

“I personally believe that gold price should exceed $2,000 before the end of this year,” Paul told Khaleej Times on Thursday.

Central banks' role

Krishan Gopaul, a senior analyst of the World Gold Council, said central banks' gold demand in 2023 picked up from where it left off in 2022.

"In January, central banks collectively added a net 31 tonnes to global gold reserves, an increase of 16 per cent month-on-month basis. This was also comfortably within the 20-60 tonnes range of reported purchases which has been in place over the last 10 consecutive months of net buying," he said.

He said activity was relatively concentrated during the month, with only three central banks accounting for gross purchases of 44 tonnes and one bank offsetting this with 12 tonnes of sales.

"The largest reported purchaser in 2022 was also the largest buyer in January: the Central Bank of Türkiye (Turkey) added 23 tonnes to its official gold reserves, which now stand at 565 tonnes. People’s Bank of China (PBoC) also bought again during the month, adding 15 tonnes on top of the 62 tonnes of gold reported between November and December 2022. Its gold reserves now total 2,025 tonnes (3.7 per cent of total reserves). The National Bank of Kazakhstan increased its gold reserves by a modest four tonnes in January, taking its gold reserves to 356 tonnes,” Gopaul said.