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Gold Stocks Ease Lower In North America As Profit Taking Hits The Yellow Metal

Published: 01:49 16 Oct 2009 AEDT

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This morning has seen a slight recovery in the US Dollar which appears to have triggered some profit taking in the gold market, with gold slipping $10 to $1,054.

The gold market has picked up considerable momentum over the past few days, to rise almost $40 per ounce higher than last year’s highs. Wednesday saw gold peak at $1,070 in early trading before easing back as the day progressed.

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 an ounce since April.

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 CIBC 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.

On Wall Street, gold stocks were slight weaker today. International gold producer Randgold Resources (NYSE: GOLD, LSE: RRS) fell just 23c, the world’s largest gold miner Barrick Gold (NYSE: ABX) dropped 1% to trade at $39.50, while Canada based Yamana Gold (NYSE: AUY) slid almost 2%.

Agnico Eagle (NYSE: AEM) lost almost $1.00 in New York.

Mexico focused junior producer Minefinders (AMEX: MFN), New Gold (AMEX:NGD) and Rubicon (AMEX: RBY) were among the weakest in the sector, falling over 2%. Dual listed Eldorado Gold (TSX: ELD; AMEX:EGO) fell more than 1½% and IAM Gold (NYSE: IAG) was trading 1% lower at $14.75.

Nevsun Resources (AMEX: NSU) was among the few gold stocks to rise on AMEX, Centamin Egypt (LSE: CEY, ASX: CNT, TSX: CEE) was unchanged on the day.

In Toronto, Timmins Gold (TSX-V: TMM) dropped three cents, TSX Venture stock Victoria Gold Corp (TSX-V: VIT) lost 2% and Hawthorne Gold Corp (TSX: HGC) was unchanged on the day.

Low-cost emerging gold producer Gold Resource Corp (OTCBB: GORO) fell 1% in the OTC market.

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