Wednesday, October 7, 2009

Gold Stocks Consolidate After Gold Hits $1,050 To Record All Time High

After Gold Hits $1050 to Record All Time High Gold Stocks Consolidate.

After weeks of continued support, Tuesday finally saw gold brake through to trade at an all time high. Gold trading has continued to gain momentum overnight in electronic trading as December Comex future continues to make new record highs reaching $1,050. Since hitting the intraday highs in the early hours of this morning, the gold price has eased slightly and has stabilised around the $1,043.

This most recent rally breaks the previous record 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.

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 a new all time high.

Yesterday, speculation over the US Dollar’s position as the global reserve currency stepped up another gear this morning, following an exclusive report by the Independent. According to their sources, Gulf Arab states have been in discussions with Chinese and Russian finance ministers, with a view to creating an alternative pricing currency for oil trading.

This report adds to an emerging theme, with several separate instances where key economic policy makers have sparked query and speculation among commentators and investors alike. Last month World Bank President Robert Zoellick raised caution over the dollar's prospects of maintaining its role as the primary reserve currency, highlighting the emergence of ‘other options’. Similarly the Chinese government has strategically discussed a sometimes conflicted view on its Reserve diversification.

Undoubtedly the US Dollar’s role in the global economic structure is under the microscope, however at such an early stage many feel as though the line between political posturing and actual intent will remain blurred for some time.

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.

Many analysts believe that the Federal Reserve in particular may be wrong about inflation. A number of weeks ago 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 Wall Street, North American gold equities have generally experienced consolidation in a mixed session following a particularly strong session on Tuesday. Major international gold producer Randgold Resources (NYSE: GOLD) eased back following yesterday’s strong performance, shares fell $1.00 to trade at $72.16. Canada based Yamana Gold (NYSE: AUY) rose fractionally, gaining a couple of cents. Meanwhile the worlds largest gold producer Barrick Gold was relatively unchanged also.

Ontario based Rubicon Minerals (AMEX: RBY) and New Gold (AMEX:NGD) both added 1%. Agnico Eagle (NYSE: AEM) and IAM Gold (NYSE: IAG) were relatively unchanged, holding on to yesterday’s gains. Mexico focused producer Minefinders (AMEX: MFN) eased slightly to drop just less than 1%. Similarly Eldorado Gold (TSX: ELD; AMEX:EGO) eased just three cents per share.

Keegan Resources Inc (AMEX: KGN) has show consistency over the past few session, rising again today, adding 30c to rise almost 7% on Wednesday morning. South American focused exploration play Exeter Resource Corp (AMEX: XRA) was also among the stronger gold equities, rising 3%. Nevsun Resources (AMEX: NSU) gained 2% to trade at $2.55.

Multi-listed, Middle East focused Centamin Egypt (AIM: CEY, ASX: CNT, TSX: CEE) rose over 2%.

In Toronto Hawthorne Gold (TSX: HGC) rose 1%, Timmins Gold Corp (TSX-V: TMM) was among the strongest junior gold stock on Toronto’s venture exchange, rising more than 5%, and fellow TSX Venture stock Victoria Gold Corp (TSX-V: VIT) rose 4%.

Low-cost emerging gold producer Gold Resource Corp (OTCBB: GORO) advanced 2% in the OTC market.

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