Welcome to Kitco News’ 2023 Outlook Series. Uncertainty continues to dominate financial markets as central bank monetary policies push the global economy into a recession to cool down inflation. Stay tuned to Kitco News to learn from the experts on how to navigate turbulent financial markets in 2023.
(Kitco News) – Receding recession fears have provided limited selling pressure in gold as prices continue to hold around $1,940 an ounce. The market continues to digest a slightly rosier economic outlook from the International Monetary Fund.
Tuesday, in its updated global economic projections, the IMF said it sees the world economy growing 2.9% this year and rebounding to 3.1% in 2024. Although growth is expected to be below trend, economists do not see a recession on the horizon.
“Economic growth proved surprisingly resilient in the third quarter of last year, with strong labor markets, robust household consumption and business investment, and better-than-expected adaptation to the energy crisis in Europe. Inflation, too, showed improvement, with overall measures now decreasing in most countries—even if core inflation, which excludes more volatile energy and food prices, has yet to peak in many countries,” said Pierre-Olivier Gourinchas, economic counsellor and director of research of the IMF, in a commentary.
While the improved economic outlook created a little volatility in the gold market, prices remain in a solid uptrend and continue to consolidate near last week’s nine-month highs. April gold futures last traded at $1,944.40 an ounce, up 0.27% on the day.
Gourinchas added that with falling inflation pressures, China’s reopening and a weaker U.S. dollar are providing relief for emerging markets and developed countries.
In its updated forecast, the IMF said emerging markets are forecasted to outperform developed economies. The analysts noted that nine out of 10 advanced economies will likely decelerate next year.
The U.S. economy is expected to see slower growth of 1.4% next year and rise 1% in 2024 as the Federal Reserve’s aggressive monetary policy action continues to work its way through the economy.
At the same time, Europe is projected to see 0.7% growth this year, rising to 1.6% next year. The IMF said that the European Central Bank is just starting its tightening cycle and the region’s reliance on imported energy provides challenges to economic activity.
The IMF is somewhat more upbeat about China as the government reopens its economy and lifts its restrictive COVID-19 policies. Economists see China growing 5.2% this year, with slower growth of 4.5% in 2024.
Although the IFM is slightly more optimistic about global growth this year, the economists said there are still persistent risks. The economists said that stubbornly high inflation, forcing central banks to continue aggressively raising interest rates and an escalation in the war in Ukraine, threatening global stability and destabilizing food and energy markets, pose risks to their outlook.
“The global economic outlook hasn’t worsened. That’s good news, but not enough. The road back to a full recovery, with sustainable growth, stable prices, and progress for all, is only starting,” said Gourinchas.
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