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The Gold Stock Strategist analyzes leading junior gold producers and major gold mining companies.

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Wednesday, November 11, 2009

Gold Surges to Record High, Again

The precious metal continues its rally above $1,100 as the dollar remains weak.

Gold continued to surge higher and set a record high Wednesday as the dollar remained weak. December gold futures rose $12.10 to hit an all-time record price of $1,119.20 an ounce intraday and settling at $1,114.60 an ounce.

Investors are moving their money into gold because of a weak dollar, weak economic conditions, and concerns over commercial real estate loans at financial institutions.

The U.S. dollar index (DXY) bounced back above 75.00, but was trading by 9:00pm tonight at 74.94. The DXY tracks the performance of the dollar against a basket of other major currencies. The 74.00 target area is the next critical technical support line. The dollar is expected to remain soft as the Federal Reserve holds interest rates near zero into next year. Commodities priced in dollars, like gold, are viewed as safe haven investments and move higher as the dollar weakens.

Gold is up eight days in a row, including a surge of 5 percent last week on speculation that central banks will buy more of the yellow metal as an alternative to the dollar. The rise in gold was sparked, in part, by the Reserve Bank of India buying 200 metric tons of gold last week from the International Monetary Fund.

The price of gold is up more than 28 percent this year, with Goldman Sachs forecasting it could go as high as $1,200 an ounce by the end of the year if real interest rates stay negative.

The Federal Reserve is caught between keeping interest rates low to bolster the weakest job market in 26 years while being concerned that low interest rates may lead to future inflation in hard assets and crude oil.

Several gold mining stocks also surged higher on continued dollar inflows.

Gold mining major Newmont Mining Corp. (NYSE:NEM) rose 78 cents, or 1.6 percent, to $51.24 and hit a 12-month high of $51.97 intraday.

Increased attention is likely in the junior gold mining space with the launching of the Van Eck Global Market Vectors Junior Gold Miners ETF (GDXJ). Share prices are even higher for junior gold miners.

Junior gold producer and Market Vectors Junior Gold Miner Index component Jaguar Mining Inc. (NYSE:JAG) was up 22 cents or 2.1 percent, to $10.55 per share.

Canadian TSX listed stock Terrane Metals Corp. (TSX:TRX; OTC:TRXOF) was up 4 cents, or 4.1 percent, to C$1.01 per share.


Dantem said...
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