Source: Gold Alert

Gold futures traded up to $1,301.30 per ounce on the COMEX as the gold price continued to power higher amid weakness in the U.S. dollar. The gold price has surged 4.2% in September, bringing is year-to-date gain to 18.5%. Gold prices have rallied alongside the broader commodity complex, which is headed for its fifth straight weekly gain as measured by the Reuters/Jefferies CRB Index. Hard assets have been strong as the U.S. dollar decline has accelerated in recent weeks. The euro has risen in concert with the gold price, appreciating to 1.34 versus the dollar Friday morning, its highest level since April.

Gold mining producers and explorers have rallied on the back of the ascending gold price – with the Market Vectors Gold Miners ETF (GDX) gaining 4% this month. Earlier this week, institutional investors gathered at the annual Denver Gold Forum, where both industry executives and the investment community were in good spirits amid record gold prices. While the senior gold producers have posted impressive gains both this month and this year, the small-cap gold mining equities have seen spectacular returns. The Market Vectors Junior Gold Miners ETF (GDXJ) has bested its larger counterpart, the GDX, by roughly 300% this month, rising 11.9% in September alone.

A flurry of mergers and acquisitions has bolstered the smaller gold miners and explorers although given the large percentage moves in many of these companies, the pace of activity may slow in coming months. National Bank Financial analyst Tara Hassan, in a note to clients, commented that “While many juniors pointed to the increase in implied valuation as a result of recent transactions (Kinross (KGC) – Red Back Mining (RBI), Goldcorp (GG) – Andean (AND.TSX) ), the run-up in valuation of numerous junior gold companies during the quarter has resulted in many trading at premium valuations which may make acquisitions more challenging in the coming months.”

In a bull-bear debate over the direction of the gold price at the Denver Forum, Paul Walker of the metals consultancy firm GFMS, squared off against Dundee Wealth’s Martin Murenbeeld. While Walker called for weakness in the mid-term, Murenbeeld forecasted a continuation of strong gold prices in the back of investment demand.

What does a $1,300 gold price mean? According to Bill Fleckenstein, President of Fleckenstein Capital and a long-time bull on the gold price, “Gold at $1300 doesn’t mean a whole heck of a lot any more than $1200, $1100 or $1000 did.” Fleckenstein elaborated his thoughts to CNBC, stating that “There seems to me there is a tremendous amount of angst about gold having a correction, the implication being everyone is worried about those folks who already own gold. To me, the bigger trade is, almost no one owns gold. And, if you ask your friends, do they own gold and how much, I think the securer trade is that people have yet to understand that this colored paper is not worth anything and people need protection. There will be shakeouts as in the past, but the path of least resistance is up.”

How high will the gold price ultimately go? While nobody has a crystal ball, Fleckenstein postulates that “I don’t know whether a parabolic move will happen in the near-term. I think before it is over, sometime it will go parabolic.”