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A steady week for gold but silver prices on the rise again

Thursday, April 21, 2016

The gold price has remained pretty steady in the first half of this week, although it was down from the highs seen at the end of last week.

For precious metal watchers and investors, the big story has been the continued rise in the value of silver. It has now reached its highest price in 11 months and has already increased in value by 11 per cent so far in April. Reuters reported that silver is now on course to record its biggest monthly gain since June 2014.

Silver reached £12.02 per troy ounce on Tuesday (20 April) and the gold/silver ratio – how much silver it takes to buy one troy ounce of gold – was at its lowest in almost six months, at 73.1.

ABN Amro analyst Georgette Boele said: "If you look at the long-term outlook for the gold/silver ratio, it can go a lot lower. That would mean that if you're optimistic on gold prices, silver can go a lot higher."

Future factors for gold

The steady gold price this week, which has hovered around the £871 per troy ounce mark, has been largely due to a quiet period for economic news.

Rob Haworth, from the Seattle-based US Bank Wealth Management, said that in order to rise, the gold price needs “a clearer indication of central bank policy and some other demand indicator”.

That could come later today (Thursday), when the European Central Bank (ECB) meets to decide on its latest interest rate policy, and with the forthcoming meeting of the Bank of Japan. The ECB is widely forecast to leave interest rates across the eurozone on hold.

However, Simon Gambarini, an analyst with Capital Economics, said he expected to see some further increases in the gold price although there would be fluctuations.

He said: "Sentiment towards precious metals, particularly towards gold and silver, has been quite good both in the futures market and the ETF market, and that should help build a floor underneath prices."

Will the gold price continue to rise?

Investor interest is being credited with gold’s high-flying performance so far in 2016.

Charles Morris from the AtlasPulse Report, told the Daily Telegraph: “Changes in investor interest explain 80 per cent of the move in the gold price. When they buy, it rises, and when they sell, it falls. It is as simple as that.”

But not all analysts are united on where the gold price will go from here. While Citi said in a report that it expects risk factors to calm, leading to better equity market performance and less interest in the precious metal, HSBC expects further rises on the back of recent momentum.

The bullish view for gold is also backed by expectations that central banks’ policy of trying to stimulate the global economy with lower interest rates will not be sufficient.

According to the World Gold Council, there is a threat of negative interest rates which it said was pushing central banks and institutional investors towards the safe haven offered by gold.