Gold could offer better-than-expected return this year as a slide in crude oil prices may boost the safe-haven appeal of the precious metal.
However, new investors are recommended a “buy-and-trade” strategy, rather than a “buy-and-hold” route, said Davis Hall, global head of foreign exchange and precious metals advisory at Crédit Agricole S.A.
Gold price movement will inevitably be affected by the US Fed fund rate policy, Hall said, according to the Hong Kong Economic Journal.
That said, the plunge in oil prices will result in deflationary pressure than could lead to a milder degree of hike in the Fed funds rate, and there is even a chance that the US central bank may slow its pace of rate increases, Hall added.
According to research by the Minneapolis Federal Reserve, there is a 72 percent chance of the US facing one-percent deflation this year, the highest probability in five years.
Fears of a default by the Ukrainian and Venezuela governments would also drive funds to gold.
Hall said a “buy-and-trade” strategy is better than “buy-and-hold”, with US$1,100 to US$1,150 being a viable entry range.
David Govett, manager of precious metals division at global commodities broker Marex Specttron, however, warned that Russia may sell gold to defend the nation’s plummeting currency.
Given that prospect, risk-averse investors may want to avoid the precious metal, he said.
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