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Gold is a highly sought-after precious metal which, for many centuries, has been used as money, a store of value and in jewelry. The metal occurs as nuggets or grains in rocks, underground "veins" and in alluvial deposits. Modern industrial uses include dentistry and electronics, where gold has traditionally found use because of its good resistance to oxidative corrosion.
Gold rally pauses after eventful week, gold producers slip in morning trading
The gold rally appears to have been put on the back burner in recent sessions. Overnight trading in Asia saw the gold price move sideways and in Europe the price has eased slightly, losing US$1.00/ounce. This week saw a further increase in activity on the gold market as mid week trading saw a number of new highs, peaking at just over $1,070.
It has been clear that the US Dollar has been the principle driving force over the course of this rally which has seen gold rise around $200/ounce since April. The dollar index has risen marginally overnight and this morning and appears to be capping the Gold price.
In the past couple of months, gold seems to have been at the forefront of investors' minds. The level of speculative ‘net long’ positions reached new highs, with both investors, traders and institutions all getting in on the action. Given the strength of the recent gold price, many commentators have indicated that any form of Dollar recovery will trigger selling as traders lock in short term profits.
Analyst sentiment is becoming increasingly mixed as more and more commentators, company CEOs and economic pundits throw in their ‘two-cents’. Generally the debate has centred around the relative strength of the US Economy, the potential for global inflation and the US Dollar’s role as the global reserve currency.
Last week analysts at CIBC seemed downbeat on the gold rally’s sustainability, According to CIBC the main factors behind gold’s recent surge were fading and the US Dollar is poised for a “relief rally” in the next two or three months, having “overshot to the downside.”
Trading screens have turned red this morning in London as the majority of gold stocks suffer losses across the board as investors lock in profits following the substantial gains in recent weeks. In the FTSE 100 Randgold Resources (LSE: RRS, NYSE: GOLD) eased 0.5%. Diversified precious metals miner and developer Petropavlovsk (LSE: POG) fell 1%, while Canadian based Yamana Gold (LSE: YAU, TSX: YRI, NYSE: AUY) was notably weaker, dropping 2% to trade at £7.40.
South American based explorer Mariana Resources (AIM: MARL) was among the leading fallers in the sector with a 7% decline. Turkey focused gold miner Ariana Resources (AIM: AAU) and Argentina focused gold explorer Patagonia Gold (AIM: PGD) followed with losses of 6% and 5% respectively. Kazakhstan operating gold producer and copper developer Frontier Mining (AIM: FML) also dropped 5%. Commodity asset development company Mercator Gold (AIM: MCR) was down 3.5%.
Africa operating gold and platinum recovery specialist Goldplat (AIM: GDP) was one of the few bright spots in the sector with a 4.5% gain.
