However, gold reversed this downward trend in November, jumping to $1,754 by month end. In December, the rally continued and that last-minute surge took gold to $1,814.
But how can such a performance relative to December 31, 2021 be seen as good? Because real interest rates rose 250 basis points while the US dollar appreciated more than 8%. As the WGC notes, “the previous largest annual rise in yields was 150bps with a flat dollar. That year—2013—saw gold prices fall almost 30%.”
According to the WGC, 2022 was “a textbook example of gold’s stable and uncorrelated performance amid market turbulence.” Indeed—the US stock market plunged 19.4% last year. It implies that gold was truly a safe haven during a market storm and a valuable portfolio diversifier.
Gold’s volatility remained close to its long-term average, something we can’t say about equities. And gold’s correlation to a 60/40 equity-bond portfolio, although higher than the average, remained low at 20, which is, in the WGC’s words, “an indicator of gold’s characteristic as a consistently reliable diversifier during market turmoil.”
The WGC’s previous report saw a stable, positive outlook for gold. The latest report confirms that a mild recession is playing out but with a more severe downturn, so 2023 should be positive for gold.