dubai gold

Dubai Gold Slips – Permanent Decline or Arbitrage Opportunity?

Gold prices and futures stayed steady yesterday, Monday, March 13, 2017, in anticipation of the two-day Federal Reserve meeting. The highly anticipated meeting begins today and will conclude tomorrow. The world expects a statement to be given after the meeting ends. The general consensus among investors and analysts is that the official statement will include increasing prime interest rates. Dubai gold prices fell slightly today from yesterday’s Dh146.25.

Will Gold Decline Further?

The gold market has been on edge since the beginning of the year. Although the yellow metal has performed relatively well, it is not expected to last forever. With inflation on the rise and a positive February jobs report in hand, the argument for rate increases is strong.

One or more interest rate increase this year will not come as a surprise to investors, so huge swings following the announcement is unlikely. Dubai gold prices could decline slightly as more certainty will push cautious investors to other yield-bearing investments. However, an emotional reaction to a rate increase is not expected.

However, no one knows how fast the subsequent rate increases will take place. It is certainly possible that the Fed could rapidly introduce subsequent interest rate hikes. The Fed’s decisions depend on the development of the U.S. economy, including inflation and job creation. If rate increases come quickly, gold prices, in Dubai, the U.S. and around the world, could take a dramatic plunge.

Furthermore, the market is still unclear about what tax reform and job-creating policies will flow from the White House. These actions could greatly affect the metrics that the Fed uses for determining when to implement an increase and how much the increase should be.

Dubai Gold – Invest While Prices Are Low?

In the OPEC region, there is more at play than interest rates and USD strengthening. As the global oil market changes, so does gold. With more regulation and competition, the OPEC region has seen volatility in the equities market. Just like any investment, there is no way to know if equities or safe-haven investments are going to provide the greatest gains.

One thing is for sure though; balancing your portfolio with some of each will provide enough exposure to risk (meaning either a positive or negative impact) while limiting that risk with an off-setting investment. For instance, when equities boom, gold tends to decline. When the oil market is unsteady, gold will provide a comfortable baseline for your investments.

All in all, gold provides a balance for just about any portfolio. Online gold investors can decide how much risk they are willing to accept and determine their investment ratios based on that risk.

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