Gold miners step up dehedging programs

Gold mining firms stepped up their dehedging programs during the second quarter of 2007, decreasing hedges by 5.4 million troy ounces.

A joint report by Virtual Metals and Mitsui & Co Precious Metals found that a 15 per cent cut had drawn down hedges to 31.2 million ounces, which was the 21st quarterly reduction in a row.

The figure was even more remarkable because major producer Barrick, which has dehedged a great deal in the past two years, made no reduction.

Most of the drop came from Newmont, which closed its hedge book of 2.0 million ounces, and Lihir Gold, which removed its 1.4 million ounce book. Other significant cuts were made by Buenventrua, Harmony, Emperor Mines and Newcrest.

Only four miners increased their hedge positions, the report noted.

"The largest quarter yet in percentage terms shows the momentum behind gold market dehedging, and when we consider the significant central bank sales over this period, it must have given the gold price a major boost in Q2," said Edel Tully, head of precious metals research at Mitsui Global Precious Metals.

"Looking ahead to the rest of the year, however, most of the major companies have little dehedging planned and this support could consequently falter."

The report predicted that for the full 2007 year, dehedging would be between 11 and 13 million ounces.