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Time To Diversify: Gold Prices To Hold Steady In 2018 Says Murenbeeld & Co

Kitco News

Editor's Note: View Kitco News' full 2018 outlook coverage

(Kitco News) - "Steady as she goes" will be the best way to describe the gold market in 2018 with the market sensitive to upside surprises, according to researchers at Murenbeeld & Co.

Chantelle Schieven
Head of research at Murenbeeld & Co

In an interview with Kitco News, Chantelle Schieven, head of research at the firm, said that her base case is for gold prices to average the year around $1,318 an ounce with two scenarios that could see prices fall below $1,200 an ounce or rise above $1,400 an ounce.

Schieven added that gold’s fate will continue to be tied to U.S. interest rates and the strength of the U.S. dollar.

“While we see potential for gold in the medium and long term, we do think some headwinds will keep gold in check throughout the year,” she said.

Schieven said that they see gold in 2018 as an investor’s market rather than a trader’s market, as prices look to remain consistent, with a few event-related adding  some volatility to the marketplace throughout the year.

In this environment she said that investors should feel confident rebuilding a core gold position to diversify away from high stock market valuations.

“I think you are going to see investors diversify into gold as volatility starts to pick up, but I don’t think you are doing to see a huge influx into gold,” she said. “The low volatility that we have seen since mid-2017 is not sustainable.”

Schieven said that her firm only sees two interest rate hikes in 2018, which is below the central bank’s forecast of three rate hikes and will be positive for gold.

“I think we are going to see lower inflation and it will stay moderate throughout the year,” she said. “We are thinking that the Fed is going to be slightly more muted [in] action than they expect.”

In a low interest rate environment, Schieven projects to see further weakness in the U.S. dollar. While there is a chance that U.S. real interest rates move higher into positive territory, Schieven said that it won’t be enough to weigh down the yellow metal.

Finally, Schieven said that investors will need to keep an eye on equity markets as they could face a correction in 2018.

She added that she doesn’t know the timing of a potential correction, but the two-year rally in equities is not sustainable.

“My gut is telling me that we are going to see some weakness in equities and it makes sense to diversify into gold,” she said.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.