If the economy continues to expand and the Federal Reserve remains complacent in its monetary policy, precious metals and related exchange traded funds may have a place in a well-diversified investment portfolio to hedge sudden risks.

“Against the current backdrop of stretched valuations, rising uncertainty, asset correlations, and record low volatility globally, gold demand as a risk overlay may continue to rise into 2018,” Maxwell Gold, director of investment strategy at ETF Securities, said in a research note. “In our opinion, gold’s role as a core risk management tool by providing diversification and a store of value is ever pertinent in this environment. Historically, gold has worn many hats on the risk management front including a hedge against market drawdowns, geopolitical volatility, systemic risk, inflation, and currency devaluation. Gold’s potential to serve as a dynamic, multi-faceted, and cost-effective portfolio hedge against many known and unknown risks may be a powerful tool for long term investors.”

In a bullish environment, Gold argued that high inflation along with a complacent Fed waiting on further confirmation that the recovery is ongoing and investor concerns of a disorderly Fed unwind could help lift gold to $1,445 per ounce. Comex gold futures are now trading around $1,250 per ounce.

On the other hand, Gold warned that in a bearish environment, the Fed could be more hawkish and push up rates aggressively and shrink its balance sheets at a quicker pace, which could pressure gold prices to the $1,070 per ounce level.