Photo: The Canadian Press. All rights reserved.

The Canadian dollars (loonies) are pictured in Vancouver, B.C,, Sept. 22, 2011. THE CANADIAN PRESS/Jonathan Hayward

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 101.95 cents U.S.

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

The benchmark New York oil contract was ahead $1.87 at US$91.85 a barrel, while the December copper contract was three cents higher at US$3.74 a pound. The mining sector on the Toronto Stock Exchange was also ahead two 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 about $51 billion. 

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 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.