Gold paused for breath this morning following a staggering run over recent sessions which saw three consecutive daily highs break the all time record. Gold investors in Europe have seen the yellow metal follow overnight trends with the price easing. Last night on the New York Mercantile Exchange, Gold eased somewhat after this week’s substantial gains.
In electronic trading in Europe the December Comex contract is currently trading around $15 off the new all time high recorded on Thursday at $1,060. Gold futures are changing hands around $1,046.
This most recent rally smashed the previous high of $1,033.20 which was set in March 2008. Investors now wait with baited breath to see if the gold market will find support here or whether prices will slip back as they did in 2008.
Since last March, the gold market has fall back sharply each time the one thousand dollar level was breached however the current gold market is showing a more sustained move.
As investors evaluate the current price action in the gold market, many analysts are expecting a sustained rally; some even expect that Gold will rise a further 10% from today’s record breaking high. Analysts and commentators alike have speculated that gold could reach between $1,100 - $1,300 an ounce before the end of 2009.
The spiking Gold price has largely fed off the persistent decline of the US Dollar. In the current climate the US Dollar seems unable to avoid ‘bad press’ at the moment with the most recent debate causing a further sell off.
The weak dollar has dominated commodity markets in recent months with Gold making several new highs. On London’s Intercontinental Exchange (ICE) the US Dollar Index fell further 1% earlier this morning; the Dollar index is trading around 76.1 points.
In recent weeks the US Dollar’s role in the global economic structure has come under the microscope and its persistent weakness continues to fuel the gold price which has rallied into unchartered territory. A more easily substantiated driver of Gold demand has also been highlighted as a key contributor to the rally. Increasingly it seems that investors are becoming more sceptical of central banks and finance ministers when it comes to the inflation outlook.
Several analysts have also openly questioned the Federal Reserve’s view about inflation. In September, the Fed released comments which implied that inflation would not be a threat in the near term. However many analysts and market commentators argue that investors are already using gold as a hedge against an inflationary environment which many expect to follow the inevitable end to quantitative easing.
On Thursday both the Bank of England and the European Central Bank once again held interest rates at the unprecedented historic lows as European policymakers attempt to manage the uncertainty in the global markets.
ECB President Jean-Claude Trichet claimed the ECB will have an exit strategy in place once it becomes appropriate for the Eurozone stimulus to be removed, while in the meantime ‘uncertainty remains high’ and as such low rates will remain. Similarly, Bank of England’s comments also reflected the need for further evaluation of the current economic environment before crucial monetary decisions are made.
While Economists and Central banks debate the ongoing recovery strategy, and uncertainty remains over the scale of the subsequent recover, the perceived security of Gold continues to appeal to investors. This morning several reports suggest that analyst sentiment remains fairly bullish due to the outlook for both the Dollar and the potential for accelerated inflation.
London’s major gold stocks were mixed this morning as Investors reflect on the performance of both the commodity and equity rally over the past few days.
Once again this week, diversified precious metal producer Petropavlovsk (LSE: POG) were the weaker of the FTSE gold stocks sliding 2%. Major international gold producer Randgold Resources (LSE: RRS) fell 1.5%, to trade around £45.85 per share.
Canadian based gold miner Yamana Gold (LSE: YAU) were best performer among the major producers rising 1.3% reaching £7.58.
In the AIM market junior gold stocks were generally higher, with many extending their recently strong performance.
Newfoundland operating and dual listed Rambler Metals & Mining (AIM & TSX-V: RMM) was strong again this morning extending this weeks gains, rising 8.5%, to record a 52 week high.
Tajikistan operating explorer Kryso Resources (AIM: KYS) were also notable risers also gaining 8.5%.
Australian miner Norseman Gold (AIM: NGL) both also added to this week’s strong gains rising over 5% to trade at 51.5p per share; Norseman looks set to finish the week more than 15% higher than last Friday.
Southern Africa focused gold producer Pan African Resources (AIM: PAF) advanced almost 7%. South American focused copper, gold and silver exploration company, Mariana Resources (AIM: MARL) rose 6% this morning. Fellow South American junior, Horizonte Minerals (AIM: HZM) jumped almost 9% this morning.
Central China Gold (AIM: GGG) traded in positive territory for the fifth consecutive session, the Chinese operating gold explorer advanced 5%. Last night, Obtala Resources (AIM: OBT) said it had increased its interest in Central China to 7.3%. Obtala also rose 5% this morning.
Uzbekistan operating Oxus Gold (AIM: OXS) rose 2%. Philippines focused gold producer Medusa Mining (AIM & ASX: MML) said its drilling at the Lingig prospect located mineralisation in two distinct geological settings, shares rose 1%. Other notable risers included Anglo Asian (AIM: AAZ), Highland Gold (AIM: HGM) and Shanta Gold (AIM: SHG).