I don't own any S&P/ASX 200 Index (ASX: XJO) gold shares on this first day of trading in 2023.
But that's likely to change.
The big gold stocks put in a mixed performance in 2022.
As of this morning's open, the ASX 200 has dropped 7.3% since 5 January last year. As for the top gold miners over that same period:
- Northern Star Resources Ltd (ASX: NST) shares gained 15.8%
- Newcrest Mining Ltd (ASX: NCM) shares lost 15.7%
- Evolution Mining Ltd (ASX: EVN) shares fell 27.0%
But let's not forget the dividends.
At the current share price, Northern Star pays a 2.0% trailing dividend yield, fully franked.
Evolution also pays a 2.0% fully franked yield. And Newcrest pays a 1.9% yield, also fully franked.
What went right and wrong for the ASX 200 gold shares in 2022?
The early months of 2022 started off well for ASX 200 gold shares. The price of the yellow metal they dig from the ground rocketed to US$2,050 per ounce in early March, benefiting from its haven status amid growing geopolitical turmoil.
But the good times for gold bugs didn't last, mainly thanks to surging inflation across most of the globe.
The resulting rapid interest rate hikes, driven by the US Federal Reserve, saw bullion prices slide to US$1,622 by the end of September. Gold, after all, doesn't pay any yield and tends to suffer when interest rates rise rapidly.
Alongside the price of bullion, ASX 200 gold shares tumbled from their own March 2022 highs as well.
Bringing us back to the present, gold prices rebounded strongly in the last two months of 2022.
This came amid early signs that inflation, particularly in the US, may have peaked. That in turn sparked speculation that the US Fed may not have to raise rates as aggressively as the market had priced in, and that a pivot to a more dovish stance may be on the cards for 2023.
What can investors expect from the gold price in 2023?
The gold price currently stands at US$1,824 per troy ounce.
Few analysts are expecting gold to hit new records in the year ahead. Yet many are broadly bullish about the outlook for the yellow metal, largely based on their views of the Fed's interest rate path.
If inflation in the world's top economy has indeed peaked, enabling the Fed to ease back on its tightening policies, this could spell the end of the US dollar rally. That rally has thrown up headwinds for gold, which is priced in US dollars, and hence hindered the performance of ASX 200 gold shares for much of 2022.
According to Vivek Dhar, CBA's mining and energy analyst (quoted by The Australian Financial Review), "Markets have transitioned to the end game since mid‑2022. We're getting closer to the point where central banks, including the Fed, stop raising interest rates."
CBA currently sees gold trading in the range of US$1,750 to US$1,850 per ounce. But if the US dollar has indeed peaked, Dhar said that the gold price would likely trade in the range of US$1,800 to US$1,900.
Bank of America has an even higher price target for bullion, though not until the second half of 2023.
Commenting on the outlook for gold, Francisco Blanch, head of global commodities at Bank of America, said (courtesy of the AFR):
Current headwinds are unlikely to abate until the Fed turns less hawkish. While the US central bank will in all likelihood keep tightening monetary policy, the pace of rate hikes should start to slow. This pivot will likely bring new investors into the market.
Bank of America is forecasting gold will fetch US$2,000 per ounce in the second half of the year.
Alongside the potential uptick in gold prices, ASX 200 gold shares could also benefit from any easing of the past year's labour shortages that have hampered the mining industry. As Australia enters its first year of open borders since the pandemic, the big miners are hoping to draw more workers from both interstate and overseas.
How have these ASX 200 gold shares performed since the gold price bottomed?
You can see the past year's price action for the ASX 200 gold shares below, with Northern Star the only gold stock to hand investors gains.
Since gold prices started marching higher on 31 October, though, it's been a far more positive story.
Over that period the Northern Star share price has gained 26%, Evolution shares are up 44%, and Newcrest Mining shares have gained 19%.
Should the gold price move higher in the latter half of 2023 amid an easing stance from the Fed, ASX 200 gold shares could continue to deliver some welcome gains.
