Gold price predictions for 2023 have turned increasingly bullish in recent months as the gold price has edged towards the closely-watched $2000 level.
While many experts are predicting big things for gold in the months to come, one prominent analyst has provided a unique way to analyze the price of gold.
Rameez Sadikot, a macroeconomic analyst and portfolio manager at the multi-billion Australian hedge fund, Antipodes Partners says “basic math” can provide some insight into the fair value of gold.
The math that can help form a 2023 gold price prediction
Speaking on the Antipodes podcast, Sadikot said a starting assumption that underpins his math is that gold is a true form of money – not just a store of value.
“So, given gold is priced in dollars. If we were to just divide the stock of US dollars available – what is readily convertible to cash by the volume of above-ground gold – we could in theory estimate a long-term fair value for gold,” he said.
“Now when we do those numbers, we get a gold price of around $2,900 a ton, that’s some 60% higher than today’s $1,900.
“Another way of thinking about this is that, at today’s prices there isn’t enough gold in the world to convert to dollars to bullion. So the price needs to be 60% higher for that to become a reality.”
The analyst notes the exercise is theoretical, but says it highlights a “fundamental disconnect” between today’s gold price and the quantum of dollars printed by central banks, relative to the stock of above ground gold.
BRICs could drive prices higher
Sadikot also said he believes western sanctions against Russia over the Ukraine conflict, could inadvertently become a catalyst for driving the gold price higher.
“I think we might look back at this Russia-Ukraine conflict as a pivotal point in history,” he said
“The West had hoped that by cutting Russia off from the SWIFT settlement system, in effect rendering Russia’s fiat currency reserves worthless, and combined with sanctions would bring Russia to its knees.
“The unintended consequence is that a clear message has been sent to non-aligned nations to the west and that is the West can render national reserves useless without notice. This recent weaponization of the dollar may lead many to questions about just how long the dollar’s status will remain unchallenged.
“Some countries, particularly in the BRIC block, have responded immediately to that uncertainty by selling fiat for bullion.”