Gold-MiningStocks.com (GMS) reports that upon market opening on Thursday the price of gold hit $483.20 per ounce, near the highest point in almost 18 years as investment funds and speculators searched for alternatives to currencies, stocks and bonds. Gold futures were up 13% from the beginning of 2005. The buying was done mainly by funds, with investors jumping aboard upon the release of the World Gold Council’s report on third quarter Gold demand which stated that Asian consumer demand in particular is strong.

Precious mineral buying increased on Wednesday upon speculations that gold would hit $500 per ounce (last seen in 1987) due to investor concerns about the US economy and geopolitical instability. Dorothy Atkinson, Broker with Bolder Investment Partners, sees the $500 projection as a safe bet, “The trend is your friend – the trend which has been in place for many years is not a particularly steep one, and I fully anticipate we will get to $500 per ounce in the near future.”

“Portions of the world's population are starting to remember that currencies have risk and that gold is one of the world's best stores of value/proxy for money,” said Michael Meyers, President of Running Fox Resources (TSXV: RUN) a company that features an advanced high grade gold project and a highly prospective Alberta natural gas project, both located in Canada. “The US is quietly favoring a lower valued dollar in order to pay back foreign debt with those same depreciated dollars. At the same time energy prices are very strong and appear to be going higher over the next 3 months, and there has traditionally been a strong correlation between gold and oil.”

NYSE Gold Stocks rallied at close of business on Wednesday. Bolder’s Atkinson explained that, “There is currently a move towards hard assets; investors are buying gold stocks because they are interested in owning gold, and the stocks provide leverage to the gold price.”

One of the public gold companies that is benefiting from the rally is Agnico-Eagle Mines Ltd. (NYSE: AEM) whose stock jumped from below $14 on Tuesday, to above $15 today (Thursday). David Smith, Director of Investor Relations for Agnico-Eagle explained that rising demand as well as a weak US Dollar is behind the current rally.

“The World Gold Council just came out with a report of positive demand statistics, and bullish data. Demand is rising - there is talk of some central banks adding gold to their reserves - and most market watchers in general will say that mine supply will be flat at best or even declining going forwards. This projection may explain the rise in our stock since we recently announced our goal to double gold reserves and to triple gold production by 2009.”

The precious metals market made gains as a whole with silver reaching 11 month highs and platinum hit a 26 year high. Gold has been seen to decouple itself somewhat from its inverse relationship with currencies, as the US dollar also rose upon projections of continuing Federal Reserve interest rate increases.

Agnico-Eagle’s Smith said however that this decoupling is just normal market volatility. “Gold is in a strong position due to the fact that the US Dollar is fundamentally weak with its twin deficits. Recently it may seem that the gold/dollar relationship has broken down to a small degree but over a longer period of time that relationship should remain intact.”

Brian Noer

Brian Noer has a degree in Business and Economics from the University of Western, Ontario. His career in the financial markets spans sixteen years and several continents, including: Manager with The Bank of Montreal in Canada, Associate Analyst with the structured finance group at Moody’s Investor Services in the UK, and Editor for several financial trade magazines in the UK for both Thomson Financial Publishing and Euromoney PLC (titles include Thomson’s trade magazines “The International Securitisation Report”, and “Capital Market Strategies”, and Euromoney’s “Asset Finance International”). Brian is the Writer, Editor and Research Associate for the InvestorIdeas.com portal team.

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