The lack of impressive returns has mostly been the result of central banks worldwide hiking interest rates aggressively to fight inflation. Rising rates have increased the value of gold’s competition—the U.S. dollar and U.S. Treasuries—leading prices to stagnate under $2,000 per troy ounce.

“What should have been smooth sailing for gold became the perfect storm,” Mobeen Tahir, an investment strategist at WisdomTree, explained in a CNBC interview last week. “A rising U.S. dollar and rising Treasury yields became headwinds for gold.”

But in recent weeks, with the strength of the U.S. dollar fading, gold prices have surged to a six-month high. And the precious metal got another boost from China’s decision to further ease its COVID-19 restrictions this week.

Gold futures rose roughly 1% to $1,822 per troy ounce on Tuesday after trading as high as $1,838 in the morning hours.

Analysts believe gold will see a demand boost as China, the world’s largest single market for the metal, reopens. There are also a slew of potential tailwinds for gold heading into next year.

If the Federal Reserve pauses or slows the pace of its rate hikes, treasury yields fall, or U.S. economic data deteriorates while inflation remains high, gold will outperform.

“These are sort of Goldilocks conditions for gold. Perfect for conditions for gold,” Tahir said. 

But in the World Gold Council’s 2023 Gold Outlook, analysts said they expect a “a stable but positive performance for gold” next year amid competing headwinds and tailwinds.

On one hand, mild recessions tend to bode well for gold, as do a weakening U.S. dollar and rising geopolitical tensions. On the other, inflation is set to fall in 2023, which may lead investors toward riskier assets.

“Lower inflation should mean potentially diminished interest in gold from an inflation-hedging perspective,” the analysts wrote.

Higher bond yields have also historically driven investors away from gold, but the World Gold Council’s analysts said they believe yields aren’t high enough to hurt prices significantly.

“Although higher bond yields are associated with lower gold returns and might now be deemed attractive by some investors, current yield levels are historically not a hindrance to gold doing well, particularly when accounting for a weaker U.S. dollar,” they wrote. 

For investors, WisdomTree’s Tahir noted, it’s important to remember that “every gold rally has a silver lining.”

“We may see a lot of investors express their bullish view on gold via silver next year,” he said, noting that the two precious metals often move in tandem, with silver commonly seeing better returns. 

Silver prices rose nearly 1.5% on Tuesday and are up roughly 15% over the past month.