The Subindex, which represents about 5 per cent of the main TSE 300 index, gained a total of 16 per cent last week as gold rocketed through the key $300-an-ounce level, touching a high of $327.30 an ounce

Investors continued to favour gold shares on Monday, paying particular attention to the stocks of mid-sized producers.

Toronto-based Agnico-Eagle Mines Ltd jumped C$1.10, or 8.9 per cent, to C$13.35 a share on the Toronto Stock Exchange, while Montreal-based Cambior Inc gained 45 Canadian cents, or 8.6 per cent, to C$5.70 a share on the TSE.

Shares of Barrick Gold Corp, North America'ssecond largest producer, shot up C$1.45, or 4.4 percent, to C$34.45 on the TSE, while Vancouver-based Placer Dome Inc posted a C$1.10 gain, or 4.9 per cent, to C$23.60 a share.

The two big producers kicked off the rally in gold stocks early last week after 15 European central banks stunned metals markets with a pledge to cap gold sales for the next five years.

"The first to go up are the big-cap liquid names and once people get a little more convinced that this is a legitimate rally, they start looking at stocks that got left behind," said analyst with Canadian brokerage Newcrest Capital Inc David Davidson.

Analysts noted that investors were moving toward smaller gold producers that did not have large gold hedging positions and were therefore exposed to a further rise in the price of bullion.

Hedging, a common practice among larger producers in the gold industry, allows a company to cushion the effect of a falling gold price by selling future production at a fixed price.

It can pay handsome dividends in an environment where confidence in gold is declining, as it did last year, but hedging can backfire if gold moves in the opposite direction.