A recent report from Bloomberg Intelligence highlights that the U.S. economy is at risk of entering into a recession this year, which could push gold prices to new highs above $2,000 an ounce. While some economic indicators have been strong, the report suggests that they are not convincing enough to rule out a recession. Additionally, the Federal Reserve's stance on interest rates and monetary policy could increase the likelihood of a recession occurring.
The fear is that the Fed may need to raise interest rates to combat rising inflation, which could lead to higher borrowing costs for businesses and consumers, potentially slowing down economic growth. This concern is also reflected in market sentiment, as investors have been spooked by solid employment, stubborn inflation, and robust retail sales and PMI data from January.
Bloomberg Intelligence notes that if the U.S. manages to avoid a recession, copper and other industrial metals are likely to outperform gold this year. However, if a recession does occur, gold is likely to outperform other metals due to its safe-haven status. The report notes that gold is currently in an enduring bull market despite experiencing a recent decline in February. However, the critical catalyst needed to trigger a resumption of the rally is a recession.
The report suggests that a U.S. recession and higher gold prices are still Bloomberg Intelligence's base case for this year. The precious metal may be sniffing out an eventual Fed pivot due to a potential recession, and if that occurs, gold could continue to outperform other metals in 2023.
