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(Kitco News) - In this risk-prone market, environment hedging is as important as ever, with commodities like gold eyeing the $1,400 level this year, according to the latest update from Scotiabank.

Gold has been stuck in a four-year lull, said Scotiabank commodity strategist Nicky Shiels, noting that 2019 might finally be the year when the metal breaks out of its narrow trading range.

“We feel we are in a good spot for the next commodity cycle. Gold is perking up this year, trying to break out of its four-year cycle. It is viewed generally as a hedge to the dollar alongside to being a hedge to inflationary policies and geopolitical risks. I believe gold has a chance of reaching $1,400 this year,” Shiels said.

There is no “one-size-fits-all” type of a hedging solution, added Scotiabank’s global head of Commodity Derivatives Origination Nick Likakis.

“Market risks take many forms in the mining industry. They can be across interest rates, currencies and commodities,” Likakis said.

Risks have been on the rise since 2018, with major stock volatility impacting the precious metals space.

“[Last year] showed just how volatile global markets could get. We had a backdrop of central bank policy uncertainty, increase in global trade wars, and growing geopolitical tensions. We saw commodity prices range through extreme highs and lows,” Likakis noted.

There is a growing need to mitigate risks these days, hence the need for hedging, highlighted Shiels.

“There is definitely an increasing need … to be more tactical because of increased volatility and price uncertainty,” she stated.

Earlier this week gold breached its key psychological $1,300 level on the recent trade flare-up between the U.S. and China as stock markets sold off. Since then, equity markets have recovered and gold prices once again retreated below the $1,300 level with June Comex gold futures last trading at $1,285.60, down 0.05% on the day.

By Anna Golubova

For Kitco News

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