The World Gold Council (WGC) has recently published its 2023 Mid-Year Outlook, revealing that the strong performance of gold in the first half of the year is expected to transition into a more neutral stance in the second half. According to WGC researchers and market strategists, central banks are nearing the end of their tightening cycles, and there is a market consensus of a mild contraction in the U.S. later in 2023.

Gold’s Strength in H1

As of the current press time, the price of an ounce of .999 fine gold remains just above the $1,900 range, specifically at $1,924 per unit. Over the past 30 days, gold has maintained a relatively stable position, while the statistics from the first half indicate a 5.4% increase against the U.S. dollar. Looking back over the past five years, gold has experienced a significant surge of 53% against the greenback.

The latest 2023 Mid-Year Outlook report from the World Gold Council emphasizes that gold is expected to maintain its support due to rangebound bond yields and a weaker dollar. The report also highlights that in the event of worsening economic conditions, the demand for gold is likely to increase. Conversely, if there is a soft landing or tighter monetary policy, gold may face disinvestment.

The report explains, “If the risk of a recession grows, gold investment could experience greater upside. Economic deterioration may arise from a significant increase in defaults due to tighter credit conditions or other unintended consequences of a high-rate environment. Historically, such periods have resulted in higher volatility, significant stock market pullbacks, and an overall preference for high-quality, liquid assets like gold.”

While the report does not mention bitcoin (BTC) among competing assets, it points out that gold has emerged as one of the top-performing assets in 2023 compared to U.S. cash, U.S. bonds, and the MSCI EM Index. In contrast, BTC had a strong performance in the first half, with a notable increase of over 80% during the initial six months of 2023.

The analysis from the World Gold Council reveals that gold tends to outperform equities when the manufacturing purchasing managers’ index (PMI) is below 50 and declining. Moreover, historical data suggests that if the PMI drops below 45, gold’s outperformance could be even more significant.

Researchers and market strategists at the WGC also note that gold is influenced more by bond yields than actual policy rates. This is because bond yields reflect market expectations concerning future policy decisions and the likelihood of an ensuing economic downturn.

In conclusion, the 2023 Mid-Year Outlook report states, “Given the inherent uncertainty in predicting the global macroeconomic outcome, we believe that gold’s positive asymmetrical performance can be a valuable component in investors’ asset allocation toolkit.”

As economic uncertainties persist, the question remains whether gold’s resilience will continue to shine or if investors will explore alternative assets. We invite you to share your thoughts and opinions on this matter in the comments section below.

Frequently Asked Questions (FAQs) about economic uncertainty

Q: What is the World Gold Council’s Mid-Year Report?

A: The World Gold Council’s Mid-Year Report is a publication that provides insights into the performance and outlook of gold in the global market. It includes analysis, research, and market strategies related to gold investment.

Q: What does the report say about gold’s performance in the first half of the year?

A: According to the report, gold had a strong performance in the first half, with a 5.4% increase against the U.S. dollar. Over the past five years, gold has experienced a significant surge of 53% against the greenback.

Q: What factors are expected to influence gold’s performance in the second half?

A: The report suggests that central banks nearing the end of their tightening cycles and a potential mild contraction in the U.S. economy are expected to have an impact on gold’s performance in the second half. Rangebound bond yields and a weaker dollar are also factors influencing gold’s outlook.

Q: How does gold compare to other assets mentioned in the report?

A: The report mentions that gold emerged as one of the top-performing assets in 2023 when compared to U.S. cash, U.S. bonds, and the MSCI EM Index. Bitcoin (BTC) also had a strong performance in the first half.

Q: What are the key factors that could drive gold’s demand or disinvestment?

A: According to the report, if economic conditions worsen, gold is expected to experience heightened demand. On the other hand, a soft landing or tighter monetary policy could result in disinvestment from gold.

Q: How does gold’s performance relate to economic indicators?

A: The report suggests that gold tends to outperform equities when the manufacturing purchasing managers’ index (PMI) is below 50 and declining. If the PMI drops below 45, gold’s outperformance could be even more significant.

Q: What is the conclusion of the report regarding gold as an investment?

A: The report concludes that gold’s positive asymmetrical performance can be a valuable component in investors’ asset allocation toolkit, especially considering the inherent uncertainty in predicting the global macroeconomic outcome.

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