Gold outlook to Q1 2023: Is gold returning from the alternate universe?

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For most of the past year, gold has been ignoring the red-hot inflation that we have been living in. Our internal forecasts model indicates that gold, when factoring in a US inflation rate of 7.9% in February 2022, should be trading at closer to US$2150/oz rather than US$1920/ oz where it is currently trading (7 April 2022). It’s as if gold has been living in an alternate universe. However, gold has been picking up recently, catalysed by safe-haven demand driven by the war in Ukraine. We have periodically observed such instances of geopolitical shocks bringing gold back to life. If sustained, gold could be on an upward trajectory, despite bond yields rising and the US Dollar remaining quite firm.