If you think that the price of gold has reached a top, then think again. Although a correction is likely in the near term, prices are sure to continue their bullish trend in early 2010. $1,165 is not even close to the top for all of the following reasons:

1. Silver, Platinum, and Oil Have Yet to Reach Last Year’s Highs

If gold prices were presently at a top, then the price of silver, platinum, and oil would also be at record highs–but that’s just not the case. Gold is alone in setting record highs while other commodities are still in rebound mode and have a long way to go.

2. Gold Prices Are Lingering at Record Highs

When gold reached record highs of $850 in January 1980, it was a quick move. The price jumped over $100 in a week and fell over $100 during the following week. Prices didn’t revisit $850 for another 27 years!

Fast forward to 2009, we see that gold prices took much longer to move up to record prices and it is taking even longer for prices to correct.

3. Gold is at Record Highs in Dollar Terms Only

Gold priced in Euros, Australian Dollars, British Pounds, Swiss Francs, and Japanese Yen are not even close to highs set earlier this year as evident in the chart below:

4. EU Central Banks are Exhausting Their Gold Sales

You may recall that in the 1990’s and early 2000’s, EU member states were literally flooding the market with gold. This year, EU member central banks sold
73% less gold, their lowest output since 1994. Furthermore, the Swiss National Bank said it had no plans of selling any gold in the near term.

5. BRIC, Developing Countries Have Only Begun Buying Gold

China’s central bank was the first to announce it’s gold accumulation plans, but India’s recent purchase of 200 tonnes of IMF gold was a prelude to the latest spike in gold prices. Last week, the Bank of Russia announced that it was prepared to buy any gold sold by its State Depository.

Moreover, China has been encouraging its 1.3 billion citizens to purchase silver bullion as evident in this CCTV news report:

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6. Global Gold Demand is Low

According to the World Gold Council, global gold demand is much lower than last year, in spite of record prices. Peak demand occurred in the third quarter of 2008, during the height of the economic uncertainty. Globally, gold purchases are down 34% since last year.

7. Americans Still Have Negative Perception of Gold

Many Americans still recall the downtrend of the 1980’s and 1990’s that brought gold from $850 to $250. This has forever changed their perceptions of gold and has led to far less Americans using it as an investment. How many people do you know with gold or silver investments? Amongst them, how much or how little gold do they own? Imagine if everyone suddenly decided to buy just 1 ounce of gold–not only would the price jump dramatically, but there literally wouldn’t be enough for everyone.

8. Investors Are Investing Less than in Previous Years

The average investor is still a bit concerned about the economy to invest in anything, let alone precious metals. Americans, especially are spending less and investing less.

9. Massive Inflation has only just begun

Since last year, the money supply in nearly every major currency, including the Chinese Yuan, has
skyrocketed–perhaps none more than the USD. With such a massive, record-breaking surge in money supply, it’s certain that big inflation is on its way.

10. The Global Economy Is on the Rebound

Like most large economies worldwide, the US registered a 3% economic growth rate in the 3rd quarter. Even Japan and Germany, which had been amongst the hardest hit major economies last year, have recently returned to growth. During bull markets, currencies usually decrease in value relative to commodities.

This week, precious metals prices continued their bullish trend as gold surpassed a record (nominal) price of $1,150. Silver and platinum prices reached highs unseen in over 15 months, surpassing $18.00 and $1,400 respectively. However, precious metals-related stocks traded well below highs set in recent months.

Russian Central Bank to Acquire 30 Tonnes of Gold

The Russian central bank will buy nearly 30 tonnes of gold directly from the Russian state gold repository this year. The repository will use the funds from the sale to buy diamonds from state mining company Alrosa.

Billionaire Hedge Fund Manager Paulson to Start Gold Fund

John Paulson, head of Paulson & Co., will put up $250 M towards a new hedge fund that invests in gold stocks and derivatives. This move comes after Paulson put 10% of his company’s $30 B under management into gold investments earlier this year.

Rubicon (RBY) Launches Phase II Drilling Program at Red Lake

After recently discovering significant extensions to its F2 gold zone, and upon imminent completion of Phase I drilling, Rubicon has outlined a new C$60 M Phase II drilling program for its Phoenix Gold. The new program will include a 12-month stage of 120,000 meters of underground and surface drilling.

US Mint’s Silver Eagle Sales Hit 25,000,000

Silver Eagle sales at the US Mint have hit new highs of 25,000,000 for the year. The coin’s popularity has picked up in recent weeks as silver prices have surged.

The price of gold reached record (nominal) highs this morning of $1,123 as India reported a 45% increase in gold imports. In Vietnam, the government lifted its ban on unlimited gold imports for the first time in over a year. The move is aimed at limiting high speculation, which recently led gold prices in Vietnam to a high equivalent to $1,280/oz.

Continuing demand for gold trading in China will be eased with the Hong Kong Mercantile Exchange’s announcement that it would offer gold futures contracts by January 2010.

Junior Miners Index ETF Debuts

Yesterday the Junior Miners Index ETF (GDXJ) began trading on the NYSE. 80% of the fund is invested n 38 select precious metals stocks, of which 2.17% is invested in Rubicon Minerals (RBY). Shares reached a high of $499.99 in the opening minute and closed the day near $25.

Roxmark/Premier (PIRGF/RMKMF) JV Expands Gold Zone at Hardrock

Drilling at the the Hardrock JV project in Northwestern Ontario hit high grade gold of up to 71 g/t. Resource estimates
for the property are set to be released by year’s end.

Gold quickly bounced back from a low near $ 1,025 last week to a record high of $ 1,095 yesterday, as the IMF reported on Tuesday that it sold 200 tons of gold to the India Reserve Bank almost 2 weeks ago. Today, Sri Lanka’s Central Bank announced that it too has been steadily adding to its gold reserves.

Wesizwe (WSZWF) Takeover Talk Drives Investor Interest

Wesizwe Platinum, a young South African junior platinum producer has been at the heart of talks of an Impala Platinum takeover. Impala Platinum, the world’s second largest platinum producer dropped a bid earlier this year for Mvelaphanda Platinum, citing poor economic conditions. Now that an economic recovery is expected, speculation has risen over Impala’s attempts to acquire Wesizwe instead.

Exeter Resource (XRA) Discovers New Gold Zone

Today Exeter Resource released details of its ongoing drilling project at Cerro Moro, Argentina, where it discovered more high grade gold and silver. Drill holes included grades of up to 550 g/t au and 23,000 g/t ag West of the Escondida high-grade gold vein.

PC Gold (PCGLF) Hits Bonanza Grade Gold

PC Gold reported drill results on Monday indicating high-grade gold of up to 112.5 g/t. It’s been less than 1 month since the company began its drilling program at its Pickle Crow Gold mine, a 7 square mile property in Northwestern Ontario.

US Mint Sales Hit All Time Highs

October gold and silver coin sales were at record highs. Most notably, sales of Silver Eagles neared 3 million last month, twice as many as in October 2008.

Rubicon Minerals (RBY)

Rubicon is one of the largest landholders in North America’s most mineral-rich regions. It is currently drilling at Phoenix Gold, a small portion of its 100 sq. mile properties in the Red Lake, ON region. To date, gold grades of up to 2,600 g/t au have been intercepted right next door to a top-producing Goldcorp (GG) mine. Most recent drill results showed up to 400 g/t au and significant extensions and depth to its central gold vein. In addition to Phoenix Gold, Rubicon fully owns a 593 sq mi property near the prolific Pogo mine in Alaska and a 351 sq mi. property near the Carlin Trend in Nevada.

Great Basin Gold (GBG)

Currently valued at under $1.50, Great Basin Gold is both a low-cost gold miner and an exploration company with new high-grade gold discoveries. Its two 100%-owned properties include the Burnstone, South Africa mine which presently produces 254,000 oz. of gold annually at just $495/oz., next to a Harmony Gold (HMY) mine. Its other property, the Hollister property, is located on the prolific Carlin Trend, producing 120,000 ounces of gold annually at a recently-revised cash cost of $324/oz. Most notably, recent discoveries at Hollister have shown gold grades of up to 2,156 g/t au.

Exeter Resources (XRA)

Exeter currently owns several mineral rich properties in politically-stable Argentina and Chile. The company most recently reported drill results of up to 924 g/t au at its 100%-owned Cerro Moro, Argentina property. Ongoing drilling at its optioned Capische, Chile property has revealed significant gold, silver, and copper resources.

Claude Resources (CGR)

Claude has an active mine at its Seabee, Saskatchewan property and ongoing drilling programs at both Seabee and its Madsen, Red Lake, ON property. Last year, Seabee produced 45,000 oz. au at a total cash cost of C$683; however, it recently reported that it increased its Q3 gold production by a remarkable 80%. Seabee also reported recent drill results with grades of up to 20 g/t au. Gold grades were even higher at Madsen, where up to 141 g/t au were intercepted.

Northern Abitibi Mining Corp. (NOMNF)

Northern Abitibi derives its name from its location in the northern part of the Abitibi subprovince of western Quebec, where it has a joint venture gold drilling project. However, its most promising discoveries have been in Newfoundland. Recent drill results at its Viking, Newfoundland property uncovered grades of up to 27.7 g/t au; however, previous results have included grades of about 218 g/t au. Its 119 sq. mi Taylor Brook property and 47%-owned Voisey Bay property have significant nickel and copper resources.

Precious metals prices fell further yesterday as high demand was reported at US Treasuries auctions this week. The decline also coincided with news of Russia’s plan to sell 1.6 M oz. of gold, taking advantage of higher prices.

Top Takeover News

Gold Reserve (GRZ), previously the takeover target of Russian minerals giant Rusoro, announced that its Brisas property has been seized by the Venezuelan government.

Best High-Grade Precious Metals Discovery

Among recent gold discoveries, Great Basin Gold’s (GBG) stood out most. Drilling at its Hollister, Carlin Trend, Nevada property showed bonanza gold grades of up to 2,156 g/t. Great Basin also announced that its Hollister property is producing 60,554 oz. of gold at a lower average cash cost of just $ 324/oz.

Top Coin News

The Austrian mint, the world’s largest producer of pure gold coins, Announced today that it will cut production by nearly a third over the next year. Sales of coins were up over 14% and total bullion sales were up 23% this year

In the U.S., over 110,000 2009 American Buffalo gold coins have been sold since first released on October 15. In just two weeks’ time, coin sales amounted to nearly 64% of the total sales from all of last year.

Last week, Rubicon Minerals (RBY) announced more impressive drill results at its Phoenix Gold project at Red Lake, ON. The team intercepted high-grade gold measuring 3 to 457 g/t. Although some prior drill holes uncovered higher gold grades, Daniel Earl of TD Newcrest calls this latest discovery, “…one of the deepest high-grade hits to date in the F2 Zone.”

This could be one of the most significant hits since the program began. Rubicon CEO, David Adamson, noted the “important extensions to the depth potential and strike length potential of the F2 gold system…The system remains open in all directions and…extends the F2 system beyond our current 9X target areas.”

Some analysts believe that the F2 gold zone is considerably larger than anyone previously imagined. For instance, analysts at Macquarie Captial Markets said the results “increase our assumed volume of the mineralized envelope by well over 75%…”

In our opinion Rubicon’s latest results show an absolute minimum resource of 5 million ounces of gold at Phoenix Gold; however, estimates are more likely to be well above 6 million ounces. Consistent with past discoveries of similar significance, Rubicon announced another share offering–this time to raise $75 M in capital. Bear in mind that the company will use the proceeds to step up the drilling program, but most importantly, Rubicon now has more institutional support than ever.

This week, we saw a slight decline in precious metals prices as festival gold buying during India’s Dhanteras and Diwali settled. The price of gold, silver, and platinum showed significant support near $1,045, $17.40, and $1,350 respectively.

New JV Projects

This week, major gold miner, AngloGold Ashanti (AU) and major diamond miner, DeBeers announced a groundbreaking joint venture project to explore and eventually mine minerals in the ocean.

Top Takeover Talk

China’s state-owned China Minmetals Corp is looking for potential takeover targets, specifically gold mines in Australia and Canada, according to a top executive. Thus all eyes are on Canadian and Australian juniors with significant gold reserves.

Best Recent High Grade Discovery

Apollo Gold (AGT) recently announced assay results from its Grey Fox property near Timmins, Ontario, at which high-grade gold between 8 and 277 g/t au was intercepted.

Top Coin News

The new 2009 American Buffalo gold coins went on sale last week and have quickly become the US Mint’s best-selling coin. Since then, over 71,000 coins have been sold, far more than the American Eagle gold coin’s sales for the entire month of October. Given such high demand for the Buffalo, the US Mint raised its price by $100 to $1,118.88 per coin.

Gold and gold stocks may have set records last week, but silver and silver stocks have yet to rebound to last year’s highs. As a result, gold has grabbed the spotlight even though silver has been and continues to be, by far, the better investment.

This year, The price of silver has increased by 63% compared to gold’s mere 30% rise. Furthermore, if you bought silver after the 2008 market correction (last November), then your investment would have doubled compared to a 53% gain if you invested in gold.

Even since the start of the precious metals bull market, silver has been a better investment than gold. From November 2001 to March 2008, the price of silver has surged 416% compared to gold’s 317% advance from April 2001 to its all-time high last week.

The reason we believe that silver will continue to outperform gold is that silver is still severely undervalued. Just take a look at the 1:60 ratio of the price of gold to silver, which is not only much higher than a historical average of 1:15, but higher than current production rates. Roughly 80 M ounces of gold are produced annually, compared to about 600 M ounces of silver–a ratio of just 1 to 7.5! This implies that silver should be trading at $142 an ounce. Although it may be a long time before silver reaches that price, silver still has a long way to go in order to close the gap between its absurdly undervalued market price and its true value.

Yesterday, gold and many precious metals stocks set new records. The price of gold hit a new (nominal) high above $1,070, before quickly retreating. Similarly, shares of Rubicon Minerals (RBY) reached a record price of $4.80, over 20% higher since our September 28th commentary.

New JV Projects:

Last week, Platinum Group Metals (PLG) announced details on a second joint venture project with Japan Oil Gas and Metals National Corporation (JOGMEC). In Japan’s efforts to accumulate precious metals assets, the company will invest $3.2M for 37% interest in the new 60 sq. mi exploration area in South Africa’s platinum-rich Bushveld complex. On Monday, shares of PLG jumped nearly 15% and volume remains twice as high as average.

Takeover Targets:

This week, Solitario Exploration (XPL) announced that it has upped its bid for Metallic Ventures (MTLVF) to $18 B after learning that Metallic Ventures received a bid from a third party. The news of the rival bids pushed MTLVF shares up nearly 9% in intraday trading on Tuesday.

Recent High-Grade Discovery:

Exeter Resources (XRA) recently released bonanza-grade drill results between 9 and 942 g/t Au, and 92 and 29,452 g/t Ag at its Cerro Moro, Santa Cruz, Argentina property. This is by far, one of the best high-grade gold and silver discoveries of the year.