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Gold remains stable after US Federal Reserve publishes January minutes

Thursday, February 18, 2016

The gold price jumped midweek after falling back on Monday and Tuesday, as investors awaited publication of the US Federal Reserve’s minutes, and it remained stable after they were issued.

The minutes, from the US interest rate-setting body’s January meeting, said that members would continue to closely watch the performance of the global economy and revealed there had been discussions about halting the current policy of increasing the cost of borrowing. Although the minutes said that it was too early to change course, analysts believe that rate rises will not happen as quickly as seemed likely in December, when the US cost of borrowing was increased for the first time in almost a decade.

This is all good news for the strength of the gold price, which has already jumped around 14 per cent this year. It stood at £847.15 per troy ounce at 18:30 yesterday (Wednesday 17 February) and was slightly lower at £844.47 at 09:00 this morning (Thursday).

Natixis analyst Bernard Dahdah told Reuters: "The Fed rate hike most likely won't happen in March, and that for me is the most important driver behind the price of gold.

"Even if the wider markets improve slightly, as we've seen in the last few days, if people still believe the rate hike won't take place in March it will be hard to see gold prices continuing a downward movement.”

Strong gold demand forecast to continue

The strong international demand for gold from corporate and individual investors seen during 2015 is predicted to continue this year, according to the World Gold Council (WGC).

Its latest data, published in the new Gold Demand Trends, showed that high demand for the precious metal in the last six months of 2015 meant that 4,212 tonnes of gold were sold over the course of the year.

China, followed by India, remained the world’s biggest gold buying nation, while Chinese, European and US investors led the demand for gold bullion bars and coins.

WGC head of market intelligence, Alistair Hewitt, said: “Looking ahead, physical demand will continue to be supported by strong central bank purchases, and continued buying of jewellery, bars and coins by households across the world, led by India and China. If we just look at the year to date, the investment case for gold is as strong as ever. While stock markets have wobbled, gold has performed well.”

Latest Isle of Man Angel coins issued

In other news, the Isle of Man has launched its 2016 edition of the Angel gold bullion coin, continuing the series it started producing in 1984.

The coin, which features Queen Elizabeth II on one side and St Michael slaying a dragon on the other, is a legal tender with a fine gold purity of .999 that weighs in at one troy ounce.

Angel coins originated from France, where they were known as ange or angelot coins, and were believed to protect the holder against bad luck and poor health. They were said to be especially useful in guarding against ‘the King’s evil’, also known as scrofula, a glandular swelling in the neck.

Gold may not protect you from illness but it can help to protect your investments from the vagaries of the stock market and the effects of volatile international events.

Jeffrey Nichols of American Precious Metals Advisors told CNBC that he recommends his investors hold 10 to 15 per cent of their investable assets in bullion coins.