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gold price

  1. Zia
    3,746 Posts.
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    Today would be a great day for any announcement concerning any decent gold results:

    The gold price rose to a new all-time high, trading up to $1,081 per ounce, as investors increased their exposure to the price of gold through gold futures, physical gold, and gold mining stocks. After the close yesterday, the international Monetary Fund (IMF) announced that it has sold 200 metric tons of gold to the Reserve Bank of India, as part of its planned sale of 403 metric tons of gold formally announced on September 18. The news sent the shares of gold mining companies higher in the morning trading session in spite of the headwind of a lower S&P 500, down 0.07%, and lower commodity prices.

    India’s purchase reduces the overhang of gold on the market and also adds increasing validity to gold being a monetary asset of global central banks. As the gold price languished below its record high set in January of 1980 there has been widespread belief that gold had lost its relevancy as an asset class. The onset of the credit crisis and the extraordinary measures taken by policymakers and central banks across the globe to stabilize the economy has resulted in a decline in the integrity of fiat currencies. Money supply growth has risen and banks, notably the U.S. Federal Reserve and Bank of England, have resorted to printing currency via quantitative easing, including purchasing sovereign debt directly from their respective governments. The gold price is still 112% below its inflation-adjusted 1980 high of $2,300 per ounce.

    Budget deficits and national debt levels have risen, straining federal balance sheets and putting pressure on their currencies. While the gold price has been the strongest in terms of U.S. dollars, it has recently begun to appreciate in terms of all global currencies. Today the gold price is rising 1.7% in U.S. dollars, but is also higher by 2.2% in euros, 2.6% in Indian rupees, 2.0% in Russian Rubles, and 1.7% in terms of Japanese yen. A global flight from low-yielding currencies is underway. Gold, a sterile asset that pays no rate of interest, does not face the same competition from fiat currencies that it did in the past - due to the fact that rates have been slashed on a global basis.

    Gold mining stocks rose 5.1% today, as measured by the Market Vectors Gold Mining ETF (GDX) on the back of the 1.7% rise in the gold price. The GDX has risen 33% thus far in 2009. Appreciation in mid- and small-cap gold miners has been multiples of the large-cap companies, which have suffered from production short-falls, start-up delays, and an inability to control costs. Year-to-date returns in Iamgold (IAG), Golden Star Resources (GSS), and Aura Minerals (ORA.TSX) have been 135%, 252%, and 313%, respectively.

    India’s move to increase its gold hoard by 55% over the past few weeks with the gold price near its record high is being heralded as a material market-moving event. Today’s spike to record highs is partially based on the expectation that emerging nations such as China and India will continue to diversify their foreign exchange reserves away from U.S. dollars and into gold. Just as it has for thousands of years, gold appears to be reasserting its role as an alternative currency.
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