2023: Year of Recession and Silver above $30?

As a lot of analysts now agree, the main theme of 2023 is going to be a recession. Could it catapult silver prices above $30?

Say goodbye to 2022 and welcome 2023! The passing year was a time of high inflation, war, and the Fed’s very aggressive tightening cycle. Now, the question is, what will be the central theme of the new year? Well, if most analysts and investors are right, 2023 will be a year of recession.

Goldman Sachs says that the chance of a recession next year is 35%, but other financial institutions are more bearish. For JPMorgan, it is very likely, Wells Fargo is pricing in a recession in the third quarter of the next year, and Bank of America forecasts it as soon as in the first quarter of 2023.

Usually, when virtually everyone expects declines, it’s a good time for purchases. However, a recession is expected because this is the usual effect of hikes in interest rates and a tightening of monetary policy. The current tightening cycle is the most aggressive rate hike campaign since the 1980s. Hence, even if you know this mechanism but simply don’t have the liquidity to finish your investments projects, you will have problems, no matter your narrative about the economy. Additionally, recessionary expectations could become a self-fulfilling prophecy. If people fear recession, they could curb their investment spending, triggering the actual downturn. Anyway, I think it’s smart to trust the signal sent by the inversion of the yield curve, the most reliable recessionary indicator in economic history.

Implications for Silver

What does it all mean for the silver outlook for 2023? Well, if a recession is coming, this might be the last moment to buy the metal at good prices. Precious metals usually smell the odor of a downturn and start going up in advance. In the acute phase of the financial crisis, their prices may decline, as there is a widespread sell-off of assets to raise cash, but they rebound later and continue the rally. Both the Great Recession and the Great Lockdown were ultimately beneficial for gold and silver.

Hence, 2023 should be much better than 2022 for the precious metals. As the chart below shows, this year, the price of silver rose more than 4%, from $23 to $24. I usually refrain from giving specific price predictions, but why not have some fun? If 2023 is really a recessionary year, I think that it wouldn’t be especially outrageous to see the price of silver around or even above $30 next year. If this year silver managed to rise more than 4%, the 25% gain in a recessionary year seems to be within the reach of silver.

Arkadiusz Sieron, PhD