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Gold bars

SEBASTIAN DERUNGS/AFP / Getty Images

The gold market is glittering again as the trading week comes to an end, with bullion prices striking fresh-all time highs above $1,320 (U.S.) an ounce in London. Traders remain positvely giddy over the precious metal amid further U.S. dollar weakness today following more disappointing economic data stateside. The Institute of Supply Management said its purchasing managers index on economic activity in the manufacturing sector rose to 54.4 per cent in September, missing Street expectations of 55.0 per cent growth.

Despite gold's unrelenting move north, many analysts remain upbeat and expect the momentum to continue. A snap poll of analysts conducted by Reuters this week found two of three expect prices above US $1,350 by year-end.

So where does this leave equities? According to analysts at Dundee Capital Markets, the fact that many senior producers are no longer hedged should leave them in good shape. In a research report Friday morning, Dundee Capital Markets notes that when gold miners' profitability improves, history shows that stocks enjoy positive relative price strengh.

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"Now, with the bullion topping the $1,300 mark and senior producers no longer hedged, we expect industry margins to improve, both worldwide and locally. This dynamic should translate into relative earnings strength supporting prices. This is a key ingredient that was missing in previous bull markets in gold due to hedged books," the report said.

Their conclusion: While there could be a lull in the sector later this month, dips should be bought for a strong year-end finish.

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