Goldbugs advised to gorge while Fed keeps rate low
Investors eyeing gold should also keep a close watch on US monetary policies, an expert said on Monday.
Along with supply and demand, the US Federal Reserve's policies are the main factors driving volatility in the gold price, InterGOLD Gold Trade's managing director Teerarat Chutawarakul commented.
He cautioned that gold was similar to stocks in that it was difficult to predict when prices were cheap or at what point investing in gold would generate the best returns.
"The short-term gold price will be affected by various factors, including the Covid-19 outbreak, moves by outgoing US President Donald Trump, and new economic data. However, demand and supply for gold, as well as the Fed's monetary policies, are the main factors underpinning the gold price in the long term," he said.
He advised investors to monitor Fed policy since the global market uses dollars to trade gold, while the gold price tends to rise when the dollar weakens and fall when it strengthens.
"Meanwhile, the dollar weakens when the Fed cuts interest rates or injects cash into the economic system, and it strengthens when the Fed raises the rate or removes cash from the system," he explained.
In current conditions, he expects the gold price to remain in positive territory since the Fed is injecting cash into the system and will keep its interest rate low for up to two years.
"Therefore, this is a good time to consider investing in gold," he concluded.
