Gold is just £40 per ounce shy of the all-time UK high this week, as growing fears over the state of the global economy help spur safe haven demand. Analysts are expecting further price gains for gold in USD, with potentially a new gold price record above $2,100 on the cards.

Gold already ended 2022 up more than 10% in the UK, a gain that saw it outperform many other assets last year. Now the previous record of £1,582.87 per ounce, seen in August 2020 is well within its reach as the precious metal sits at £1,546 this morning. Gold is up more than 6% in the last month alone in GBP and needs only the slightest push to get it over the record line.

060123 GBP Gold Price Chart
Below is just a handful of price-drivers investors will be watching, any of which could be sufficient to push gold to new highs.

Inflation Woes Continue - Recent figures suggest inflation may have peaked, but remains painfully high, with prices still rising and eroding the purchasing power of consumers. Lower inflation is often spun as a win, but still means prices are climbing, just at a slower pace. A mild winter in Europe (so far) has helped push gas prices down and avoided an energy crisis. This was a key concern for countries like Germany, which had emergency plans for blackouts that could have crippled the industrial powerhouse.

US Dollar Weaker? - The direction of USD will be a key driver for gold prices in 2023 and links to inflation above. That gold remains high despite a strong dollar shows the potential for more price growth should the US economy weaken due to high interest rates and economic slowdown. The Fed have made it clear they want to see inflation come down more before they consider loosening their monetary policy. The longer interest rates stay high however the more likely the US enters a recession.

Sterling has recovered somewhat from the lows seen last year after the ill-fated mini budget of the short-lived Truss government. If the UK enters a long and deep recession as expected however, the pound could weaken again, helping to push the domestic gold price up here in the UK.

Record Gold Reserves - Central Banks also turned to gold as a safe haven in 2022, buying record amounts of reserves to protect their nations wealth, adding 673 tonnes as of Q3 last year. This was the highest buying since 1967, and was a key boost for demand. Many emerging markets are looking at de-dollarisation as a key policy, and gold is proving a popular traditional alternative.

Russia & Geopolitics - After nine months the Russia-Ukraine conflict continues, with missile strikes ramping up in recent weeks. Any further escalation with Russia, particularly should it spread outside of Ukraine towards NATO territories would certainly drive gold higher, as it did when the conflict first began. Other countries like China and North Korea should also not be forgotten, relationships with them are far from simple and secure, and could easily deteriorate in the same way as Russia.

Covid in China - The ending of restrictions in China has sparked a surge of cases, and seen many countries bring in fresh travel rules. Three years after the pandemic began, new variants continue to emerge, often more transmissible. As the world continues to open up and return to a pre-pandemic level of travel and mixing, Covid continues to pose a potential risk similar to the shock of 2020 and 2021.