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Canadian dollars are shown with U.S dollars.

Ryan Remiorz/THE CANADIAN PRESS

The Canadian dollar closed nearly half a cent higher Thursday as gold hit a seven-month high and Spain announced severe budget cuts intended to convince the world that it can meet deficit-reduction targets.

The loonie gained 0.45 of a cent to $1.0195 (U.S.).

Gold prices gained more than 1 per cent Thursday, adding $26.90 to hit a new seven-month high of $1,780.50 an ounce. The last time it traded at that level was Feb. 28.

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The benchmark New York oil contract was ahead $1.87 at $91.85 a barrel, while the December copper contract was 3 cents higher at $3.74 a pound. The mining sector on the Toronto Stock Exchange was also ahead 2 per cent.

Amid fear that Spain will need an international bailout, the country's finance minister said a draft budget for 2013 cuts overall spending by €40-billion, or about $51-billion. He said cuts for ministries would average almost 9 per cent.

The cuts are meant to show investors and other countries that Spain can meet its fiscal targets.

Improved sentiment is also being helped by expectations the People's Bank of China will soon take more steps to ease a slowdown in the world's No. 2 economy.

Traders also took in data showing the U.S. economy grew at a 1.3 per cent rate in the April-June quarter, weaker than previous estimates and another report suggesting U.S. durable goods orders dropped 13.2 per cent in August, the biggest decline in more than three years.

Meanwhile,the number of Americans seeking unemployment benefits fell 26,000 last week to 359,000, the lowest figure in nine weeks. A figure consistently below 375,000 is generally enough to lower the unemployment rate.

The number of Americans who signed contracts to buy previously occupied homes fell in August from a two-year high in July. The National Association of Realtors' sales index is still 10 per cent higher than it was a year ago.

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