Gold trades near 8-month high and analysts expect its rise to continue

LONDON — Gold traded near an 8-month high Tuesday as the precious metal's strong start to 2023 continued, buoyed by lower yields and a weaker dollar.

Spot gold hit $1,881.5 per troy ounce on Monday, its highest point since May 9, before cooling off as U.S. Federal Reserve officials signaled further aggressive monetary policy action to combat inflation.

Gold was up 0.24% at $1,877.62 per ounce at 9:45 a.m. ET. Gold futures were up 0.16% at %1,880.80.

Friday's U.S. jobs report, which showed that the labor market remains strong despite Fed efforts to cool growth, sent U.S. Treasury yields and the dollar lower, but gave gold a boost.

"The metal has also been buoyed by the reopening in China with pictures of very crowded gold markets seeing pre-Lunar demand and the PBoC [People's Bank of China] announcing it bought 62 tons of gold during the last two months of the year," Ole Hansen, head of commodity strategy at Saxo Bank, said in a note Tuesday.

Hansen said focus this week will be on Thursday's U.S. CPI inflation print, and placed the "next major hurdle" for gold at $1,896/oz.

Meanwhile, David Neuhauser, founder and chief investment officer at Livermore Partners, told CNBC on Tuesday that he expects the recent momentum for gold to continue as investors determine that further currency debasement is likely to occur over the coming years.

"I think as you look forward, you start to look around and think 'where is the safest place for your investment in terms of assets?' and the only place really to go as an alternative now is gold, in terms of knowing that you are not going to see that debasement of your assets," Neuhauser told CNBC's "Squawk Box Europe."

"I have liked gold for several years. Looking at the dollar peaking, it has gained a little bit of a lift-off here for the past several months, so I see that continuing for some time."

Last year — a tough one for most asset classes — gold offered an effective hedge for investors, according to precious metals investment firm Sprott. It called the precious metal a "clear macroeconomic winner in relative and absolute terms."

Bullion fell 0.28% over the course of the year compared to the S&P 500's almost-20% slide, and has a track record of outperforming the market during downturns. Along with the flight to safety facilitated by soaring inflation and volatile financial markets, gold prices were also supported by central banks buying the precious metal at a rate not seen since 1967, according to WEF.

With a number of major economies expected to go into recession and continued uncertainty over central banks' monetary policy trajectory in the face of persistent high inflation, analysts expect another rocky year for stock markets.

Sprott Managing Director John Hathaway expects a continued struggle for financial assets in 2023, but said gold and related mining shares were "severely underowned" and would prove "effective antidotes to ongoing macroeconomic chaos."

"2023 will reveal that the gross mispricing of financial assets that led to the worst performance of financial markets since 2008 has been only partially resolved," Hathaway said in a note Friday.

"We believe the bear market is far from over, even though investment sentiment is more negative than at the market lows of 2002 and 2008."

Hathaway suggested that gold's status as a "bona fide" safe haven last year defied Wall Street consensus, pointing to Credit Suisse and JPMorgan's forecasts of $1,500 and $1,520 respectively for year-end 2022. The precious metal finished 2022 at $1,824.

Credit Suisse has retained its more bearish stance and projected a 2023 year-end price of $1,650/oz, citing a higher real rate environment.

By contrast, JPMorgan last week forecast gold to average $1,860/oz in the fourth quarter of this year. The Wall Street giant expects the Fed to hit pause, with a fall in U.S. real yields driving a bullish outlook for gold and silver prices over the latter half of 2023.

"Even with a bullish baseline gold and silver forecast, we think risk is skewed to the upside in 2023," said Greg Shearer, head of base and precious metals strategy at JPMorgan.

"A harder-than-expected economic landing in the U.S. would not only attract additional safe haven buying, but the rally could become supercharged by more dramatic decreases in yields if the Fed more rapidly unwinds tighter fiscal policy," Shearer added.

These views were echoed by Randy Smallwood, president and CEO of Wheaton Precious Metals, who told CNBC last week that while 2022 was the "year of the U.S. dollar," 2023 is shaping up to be the "year of gold."