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Gold Equity Rally Continues As Yellow Metal Makes Second Consecutive Record High, Petropavlovsk Top Performer

Published: 10:23 14 Oct 2009 BST

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After weeks of persistent decline, the falling US Dollar continues to drive the Gold rally. The yellow metal has now been trading above 2008’s previous highs for a seventh successive session. This morning’s most recent advance has seen Gold make yet another new high over $1,070, in electronic trading the Comex December contract traded as high as $1,072.


After a consolidating period on Friday and Monday, the gold market changed gears yesterday, gaining more than $20 over the past couple of sessions. Tuesday saw the yellow metal continued to gain momentum and test $1,070 in early trading before easing back as the day progressed.


The latest move was triggered by further broad based Dollar weakness. The US Dollar index on London’s Intercontinental Exchange (ICE) fell another half percent overnight to stand at 75.78. The Dollar index has fallen consistently from its 2009 high of 90 points in March. The US Dollar index represent the relative strength of the Dollar against a basket of the 6 other major global currencies.


Some analysts claim that this most recent movement in Forex and Commodity markets comes as reports suggest that the Federal Reserve will maintain their unprecedented low rates for longer than the other major central banks.


The recent rally in Crude Oil, which has seen crude hit $75, has also supported the wider commodity market.
As investors evaluate the current price action in the gold market, analyst sentiment is beginning to conflict with some pointing to an overbought yellow metal.  On Friday a new monthly investment strategy report from CIBC, ‘Global Positioning Strategies’ seemed downbeat on the gold rally’s sustainability. According to CIBC the main factors behind Gold’s recent surge were fading off with investor worries easing and the US Dollar being poised for a “relief rally” in the next two or three months, having “overshot to the downside.”


On the other hand, more bullish analysts are expecting a sustained rally; some even expect that gold will rise a further 10% from today’s record breaking high, with prices speculated to reach between $1,100 - $1,300 an ounce before the end of 2009.


In the FTSE 100 the international gold producer Randgold Resources (LSE:RRS, NYSE: GOLD) gained strength from the record breaking Gold price rising £1.40 to trade at £47.12, up over 3% on the day.


Diversified precious metals miner and developer Petropavlovsk (LSE: POG) was the strongest of the mid-cap gold stocks rising 7% in the FTSE 250. Canadian based Yamana Gold (LSE: YAU, TSX: YRI, NYSE: AUY) was marginally stronger rising half a percent.


On the AIM market the juniors have generally been positive.


Pacific Rim focused explorer Solomon Gold (AIM: SOLG) was easily the strongest performer among AIM’s gold stocks, as they jumped 17% this morning. Fellow pacific operator Vatukoula Gold (AIM: VGM) were also positive as the Fijian explorer rose nearly 2%.


Uzbekistan operating Oxus Gold (AIM: OXS), Frontier Mining (AIM: FML) and European Goldfields (AIM: EGU) all rose 4%. Centamin Egypt (AIM & TSX: CEY) added to yesterday’s strong performance rising a further 2%. Medusa Mining (AIM & ASX: MML) and Central China Gold (AIM: GGG) rose more 1½%.

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