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Fed minutes’ cautious approach leaves gold price steady

Thursday, April 7, 2016

The gold price changed little after the US Federal Reserve released the minutes of its latest rate-setting meeting to the public on Wednesday (6 April).

The market had been waiting to hear the drivers behind the central bank’s decision to leave the cost of borrowing unchanged when it met in March.

The minutes revealed that although members expected strengthening news from the US labour market and an expansion of economic activity, “they saw global economic and financial developments as continuing to pose risks”.

James Steel, an analyst with HSBC, said: “Gold thrives in periods of heightened uncertainty… There appears to be enough uncertainty to prop up gold and the financial markets are no longer focused on the possibility of a near-term Fed rate hike. This relieves gold of a major weight, at least for the moment.”

The gold price dipped by around half a per cent after the minutes were released but quickly recouped its losses as the full story of a cautious approach by the Fed was absorbed by the market.

The gold price started this week at £856.85 per troy ounce on Monday (4 April) and dipped to £850.88 by 21.30 that evening. However, it hovered around the £870 mark for much of Tuesday and Wednesday. This morning at 08:00 (7 April), gold was £873.04 per troy ounce.

A look at the week ahead for gold

Next week’s gold price is expected to be impacted by the meeting of the International Monetary Fund (IMF). Analysts predict that the IMF will again downgrade the global growth forecast due to the commodities downturn that has hit nations including China, Brazil and Russia, FastMarkets reported.

This could again send the gold price higher if investors continue to seek a safe haven for their cash.

FastMarkets metals analyst, Boris Mikanikrezai said: “The resurgence of risk aversion could bode well for gold due to its safe-haven characteristics.

“Still, the speculative positioning is overstretched on the long side while ETF (exchange traded fund) demand is pausing after three months of intense buying. Against this backdrop, upward pressure could be contained.”

Rare gold bullion coin returns to the market

A giant gold bullion coin, worth around £3.8 million, is coming back on to the market for collectors and investors.

Just five of the huge coins, which are 99.999 per cent pure gold and weigh a staggering 3,215 troy ounces each, were made by the Royal Canadian Mint in 2007. They were initially marketed as the million dollar coin, but due to the rise in the gold price and the fact they have such rarity value for collectors, the cost of buying one has soared.

The coin features Queen Elizabeth II on the heads side and a maple leaf on the tails side. It is legal tender in Canada, where it has a face value of CAN $1 million.

All five of the coins were bought by private investors and this is the first time one has returned to the market since they were initially minted.