The recent themes driving gold persistently higher continued overnight, with the continuing devaluation of the dollar and inflationary concerns pushing more investors to gold. This most recent gold rally shows little sign of abating.
Having reached $1,020 earlier on Wednesday, the rally eased throughout the day in New York, however during the Asian session the COMEX Gold future for December rose strongly to trade at a recent high of $1,025.80, just $7 away from Gold’s all time high recorded in March 2008.
As many investors have come to expect in recent weeks, the weakening US Dollar has been a key instigating factor as gold rallied. The dollar is particularly weak against the Euro as it approaches a 52 week low. Against all major currencies the dollar continues to fare badly, and the ICE Futures Dollar Index continues to fall, reaching as low as 76.26 in the early hours of Thursday morning.
Analysts believe that the current rally is being justified by the fundamentals, rather than merely speculative trading or technical models. The growing concerns over inflation were further reinforced by an increase in the US Consumer Price Index (CPI). As the G20 funded economic recovery takes hold in the world’s ‘real’ economies, inflation will increasingly become a factor for economists and central bankers alike.
The last 12 months have seen the G20 introduce a combined $12 trillion, subsequently many economists have expectations of growing inflation further down the line. Economists argue that such substantial currency dilutions will continue to benefit Gold and other physical assets in the longer term.
Despite the apparent case for the a continued rise of Gold prices in the long term, some analysts have identified the record level of speculative ‘net long’ positions in the futures market as a potential short-term obstacle to a further rally.
International gold miner Randgold Resources (LSE: RRS) traded as high as £46.49 earlier this morning, however the price has eased somewhat as we approach mid-day, Randgold rose over 1% gaining 59p.
In the FTSE 250 Peter Hambro Mining (LSE: POG) rose 13p gaining 1½%, whilst Canadian-based Yamana Gold (LSE: YAU) was also positive on the day, rising marginally.
African explorer Cluff Gold (AIM & TSX: CLF) led the junior gold stocks on the AIM market, adding almost 9% to yesterday’s gains to trade at 80p, while Norseman Gold (AIM & ASX: NGL) also made reasonable gains this morning, rising over 3%. Avocet Mining (AIM: AVM) added to yesterday’s gains, advancing a further 3%.
Philippines based Medusa Mining (AIM & ASX: MML) gained almost 2%, similarly fellow South-East Asian explorer Metals Exploration (AIM: MTL) rose over 1½%.
European Gold (AIM: EGU) advanced another 6% after yesterday’s positive session.
Other notable risers included Harmony Gold (LSE: HRM) and Vatukoula Gold (AIM: VGM).
Uzbekistan focused gold miner Oxus Gold (AIM: OXS) added to yesterday’s substantial losses, falling a further 7% this morning, with Oxus currently trading at 12½p as we approach Thursday lunchtime in London. Meanwhile South American based Copper and Gold explorer Mariana Resources (AIM: MARL) also fell 6% this morning.