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Gold is up 10% this year: Is there more to come?

Gold prices hit a 14-week high overnight, hitting US$1,334.90 an ounce at once stage, before sliding back to end at US$1,326.60 an ounce. So far this year, the yellow metal is up 10%, compared to the S&P/ASX 200 Index’s (Index: ^AXJO) (ASX: XJO) gain of a meagre 1.7%.

Ongoing tensions in the Ukraine and escalating violence in Iraq have spurred gold prices higher, as investors seek the ‘safety’ of gold. A ceasefire between Russia and Ukraine appears to have broken down, suggesting there’s a long way to go before that situation calms down.

Howie Lee, investment analyst at Phillip Futures has told India.com, “We expect gold to remain elevated or even possibly climb due to multiple uncertainties“. Those include weakness in the US economic recovery and geopolitical tensions, such as those mentioned above.

The world’s largest gold-backed exchange traded fund, SPDR Gold Trust saw inflows of 5.7 tonnes to 790.7 tonnes on Monday – the biggest 1-day inflow since March according to BullionVault. All of which should be good news for Australia’s gold miners, but it appears the market has mixed views.

Kingsgate Consolidated Limited (ASX: KCN) is down 2.8% in mid-morning trade, along with Perseus Mining Limited (ASX: PRU), down 2.7% and Silver Lake Resources Limited (ASX: SLR) losing 1.5%.

Northern Star Resources Ltd (ASX: NST) is up 1.9%, but that may have more to do with the company’s announcement that it had completed the acquisition of the Jundee gold mine from Newmont Mining.

Saracen Mineral Holdings Limited (ASX: SAR) has climbed 9.5% to 46 cents, despite the company revealing in May that its all-in-sustaining cast costs are expected to be around A$1,500 an ounce this financial year, before falling to around $950 an ounce in the 2015 financial year. Hedging its gold production at well over $1,600 an ounce a year or so ago was a stroke of luck, giving the company plenty of breathing space.

With tensions rising in a number of regions around the world, the gold price may well be on its way up, although it has some way to go to breach its previous all-time high of US$1,923.70 set in September 2011.

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Motley Fool writer/analyst Mike King owns shares in Silver Lake. You can follow Mike on Twitter @TMFKinga

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