After reaching yet another record high at $1,225 the gold price has eased somewhat and was last trading at $1,216. The rally appears to have regained its momentum after stumbling at the end of last week, as the yellow metal continues to find support from the weakening US Dollar. The Dollar Index was falling again today.
The index represents the relative strength of the greenback versus a basket of the 6 other major global currencies.
Western Central Banks have maintained interest rates at unprecedented levels, practically zero, for almost a year now and have continued to ‘quantitatively ease’ their respective economies (print money). As a consequence government debt and international currencies are devaluing sequentially.
International investors, including Central Banks, appear to be finding an increasing comfort in physical stores of value, particularly gold. The yellow metal is seen as a hedge against devaluation and the potential inflationary environment, which is argued to be lying in wait once the global economy returns to meaningful growth led by the cheap new money.
The gold price has risen from around $750/ounce twelve months ago driven primarily by growing fears over inflation and specifically the decline of the US Dollar. The greenback's decline has increased the relative appeal of physical assets, particularly gold, to protect against further devaluation.
On the London Stock Exchange, FTSE 100 gold miner Randgold Resources (LSE: RRS) dropped 1%. Similarly emerging producer Centamin Egypt (LSE: CEY) also fell 1%. Elsewhere Petropavlovsk (LSE: POG) and Yamana Gold (LSE: YAU) was flat.
Iran focused gold explorer Persian Gold (AIM: PNG) was one of the top performers in the sector, climbing 10%. Kyrgyzstan focused gold explorer and developer Chaarat Gold Holdings (AIM: CGH) and Brazil focused gold miner Horizonte Minerals (AIM: HZM) both advanced 7%, while Turkey and Saudi Arabia operating gold explorer KEFI Minerals (AIM: KEF) and Lesotho operating diamond miner Kopane Diamond Developments (AIM: KDD) rose 6.7%.
Turkey focused gold miner Ariana Resources (AIM: AAU) and Kazakhstan operating gold producer and copper developer Frontier Mining (AIM: FML) both added 3.5%.