The gold price fell by $17.20 to $1,094.73 as strength in the U.S. dollar provided headwind for the price of gold and gold mining stocks. The gold price, a day after suffering its worst decline in over a month, was also under pressure due to general liquidation across all asset classes. After opening higher, the S&P 500 declined 1.43% and emerging market stocks suffered even steeper declines. The U.S. dollar saw inflows as dollar carry trades were unwound - causing selling in the commodity currencies and riskier asset classes such as the aforementioned emerging equities. The decline in the price of gold and the general selling pressure in the marketplace combined to create a toxic combination for gold mining stocks. The Market Vectors Gold Mining ETF (GDX) fell $1.75 to $43.98 while Canada’s S&P/TSX Global Gold Index was off 7.89 to 321.14. Gold mining stocks were unable to rally on positive earnings and gold production numbers from the likes of Freeport-McMoRan Copper & Gold (FCX) and IAMGOLD (IAG) - as well as from news of an acquisition by Kinross Gold (KGC). Freeport, the world’s largest publicly traded copper producer and a significant gold producer, released 2009 revenue and earnings that exceeded analysts’ estimates. IAMGOLD, a Canadian-based gold miner, reported 2009 gold production in-line with company forecasts and released 2010 gold production guidance that indicated continued growth for the gold mining company. Meanwhile, Kinross Gold (KGC), one of the largest Canadian-based gold producers, announced a $368 million acquisition of the high-grade Dvoinoye deposit and the Vodorazdelnaya property, both located roughly 90 kilometers north of the gold company’s Kupol operation in the Chukotka region of the Russian Far East. Kinross stated that it intends to develop the 2.2 million ounce Dvoinoye deposit as a larger underground mine and report an NI43-101 resource estimate during the coming year. Besides the recent advance in the U.S. dollar, gold-related investments and the broader metals and mining equity sector has been under pressure lately due to concerns that China’s strong growth in recent months will lead its policymakers to continue tightening the monetary reigns. The government of China reported that Chinese GDP grew at a rate of 10.7% in the fourth quarter of 2009 - the quickest pace since 2007 and marginally higher than the 10.5% median forecast in a Bloomberg News survey. Accelerating growth in the Chinese economy was the latest in a series of economic data points which have increased the likelihood of tighter monetary policy in China. The People’s Bank of China (PBOC), the nation’s central bank, has recently taken steps to restrict lending activities and raise bank deposits in the hopes of alleviating inflationary concerns. Speculation has risen that the PBOC will soon hike interest rates to further combat inflation concerns, and have contributed to recent declines in the price of gold and gold mining stocks. While the Chinese central bank has taken steps to cool down what many consider to be an overheated economy, the Federal Reserve has yet to follow suit - despite a dramatic improvement in financial markets over the past year and signs that the U.S. economy is recovering from the worst recession since the Great Depression. Market participants are looking ahead to the Fed’s next Federal Open Market Committee (FOMC) meeting on January 26 and 27 to see if Chairman Ben Bernanke will begin to adopt a more hawkish stance toward monetary policy. While recent strength in the U.S. dollar and weakness in the gold price and gold mining stocks may suggest this is the case, the Fed has nonetheless maintained that interest rates will stay low for an “extended period of time” and has showed little signs that it plans to raise interest rates anytime soon.

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