FX.co ★ Gold could surge in 2023 as demand for dollar continues to dip

The continued weakness in dollar is likely to support gold all throughout 2023, especially since the metal already opened the year with a 5% increase. Also, dollar has fallen by almost 10.5% since reaching a 20-year high in September.

Gold is rising steadily above $1,900, while dollar is trading around 102.17. Many believe that this situation will persist for a long time as economic activity is likely to be weak this year due to the steep inverted yield curve and aggressive policy of the Fed.

Growing geopolitical uncertainty is also weighing on dollar, affecting its role as the world's reserve currency. More and more countries are beginning to think that the US could use the currency as a weapon to retaliate against any future violations from other countries. Also, as this new world order evolves, there may be less demand for US treasuries, which allow the US to maintain its deficit-driven lifestyle.

Along with the weakness of US dollar, there is also the threat of inflation, which makes gold an attractive hedge. Many analysts believe that the Fed is yet to control inflation.

Rsing government debt, which has reached $31.3 trillion in public debt, equivalent to 124% of GDP, is also becoming a significant expense. Sustained demand for commodities, even with a looming recession, will support rising inflation.

Although gold has a great potential in 2023, the key to higher prices is still renewed demand from investors.