The gold price
Shrunken Gold Miner Hedge-Book to Stay Shrunk, Says GFMS - 16 March 2010
"These views remain firmly in line with the anti-hedging sentiment of prospective gold equity investors," the report says.
Fearing further price falls after the 20-year bear market of the 1980s and '90s, the world's major Gold Mining companies had sold forward a total of 3,421 tonnes of production – as yet unmined – by mid-2001.
The new GFMS report now pegs the outstanding total of what little hedging remains at 236 tonnes. Down by 93% from the peak, that's slightly below the estimate made last month by Virtual Metals' Q4 report for Fortis Nederlands.
Barrick Gold – the world's No.1 gold producer, and formerly holder of the largest hedge book – closed out the last 90 tonnes of its fixed-price hedging during November '09.
Coupled with news of India buying 200 tonnes of gold from the International Monetary Fund, that month saw Dollar Gold Prices rise 17% to new all-time highs.
"This leaves 46% of the global hedge book concentrated in the portfolio of one player," says GFMS – world No.4 AngloGold Ashanti.
"The company's strategy has been outlined as ongoing reduction of the hedge book [which it] will opportunistically accelerate over time."
GFMS notes that "alternative, creative sources of funding" – such as gold-denominated bonds, and also 'gold stream' payment for the right of first-refusal on new output – now "negate the need for extensive gold hedging in many cases of gold project financing."
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Adrian Ash runs the research desk at BullionVault, the physical gold and silver market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and is now a regular contributor to many leading analysis sites including Forbes and a regular guest on BBC national and international radio and television news. Adrian's views on the gold market have been sought by the Financial Times and Economist magazine in London; CNBC, Bloomberg and TheStreet.com in New York; Germany's Der Stern and FT Deutschland; Italy's Il Sole 24 Ore, and many other respected finance publications.
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