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Gold prices dip but are expected to rise again in volatile markets

Thursday, March 10, 2016

Gold prices fell on Wednesday as the dollar strengthened against the euro, but analysts expect volatility on the markets over the next few days to lead to a further hike in the cost of the precious metal.

The European Central Bank (ECB) is widely expected to reduce the cost of borrowing across the eurozone when it meets today (Thursday). This could lead to further increases in the gold price as investors head for the safe haven of the precious metal.

Gold has been enjoying a sustained rally for much of 2016. On Friday, it broke through the £900 per troy ounce mark to reach 13-month highs. Yesterday’s (9 March) prices were off that peak, standing at £883.15 at 18:30 as some profit-takers sold off investments to make the most of the strong prices. This morning, the gold price was £879.17 per troy ounce at 09:00.

One of the world’s best known gold investors, Pierre Lassonde believes the price of the precious metal will head much higher this year.

He told BNN: “The five-year bear market for gold is over and we are at the beginning of a new bull market.

“I’ve been saying for the past six months now is a good time to buy gold. You have to buy (gold stocks) when you hate them and sell them when you love them.”

Canadian government’s gold stocks ‘virtually zero’

Figures published by the Canadian government’s Finance Department show that it jettisoned almost all of its remaining gold bullion stocks in February.

Canada has been selling off its gold reserves for a number of years and the sale of 21,851 troy ounces of coins last month brings its remaining supplies down to virtually zero.

Finance Department spokesman David Barnabe told CBC News: "The decision to sell the gold was not tied to a specific gold price, and sales are being conducted over a long period and in a controlled manner.

"The government has a long-standing policy of diversifying its portfolio by selling physical commodities (such as gold) and instead investing in financial assets that are easily tradable and that have deep markets of buyers and sellers.”

However, other countries are continuing to build up their gold stocks, led by China, India and Russia. Figures from the World Gold Council show that central bank bullion buying increased by a quarter in the last six months of 2015, compared to the same period the year before.

A look at the Trump effect on gold

The race for the White House has certainly generated plenty of headlines but a side-effect of the 2016 US Presidential election could be a further increase in the price of gold, according to analysts.

The good showing of Donald Trump, who is competing for the Republican nomination, could well spook investors and increase gold’s attraction as a safe haven.

David Govett from London commodities broker Marex Spectron told the Wall Street Journal: “The mere thought [of President Trump] would suggest a good opportunity to buy gold. Who knows what could happen should he be handed the keys to the White House.”