Big Q1 Drop in Gold Hedge Book, but End of Dehedging in Sight

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Global gold hedging saw the largest decline in percentage terms on record in the first quarter of 2008 as an 18% or 4.8m ounces reduction brought the global gold book down to 22m ounces. But the Fortis Hedging and Financial Gold Report says dehedging volumes will significantly decline in 2009 and beyond.

Global gold hedging saw the largest decline in percentage terms on record in the first quarter of 2008 as an 18% or 4.8m ounces reduction brought the global gold book down to 22m ounces. But the Fortis Hedging and Financial Gold Report says dehedging volumes will significantly decline in 2009 and beyond.

The quarterly report issued by the VM Group said AngloGold Ashanti, Barrick, Buenaventura and Newcrest reduced their hedge books with a total of 4m ounces in the quarter. AngloGold Ashanti reduced its hedge book with 1.2m ounces, Barrick converted 1.1m ounces of fixed-rate contracts to floating-rate contracts, Buenaventura closed out its entire hedge book of 0.9m ounces and Newcrest cut its hedge book by 0.7m ounces to 0.2m ounces.

The balance of the reduction in the global hedge book came from 32 different companies making reductions in their hedge books.

The first quarter of 2008 also saw the lowest total new hedging since the second quarter of 2002, at 7,137 ounces.

The VM Group has increased its forecast for hedging in 2008 to 10-12m ounces on the back of AngloGold Ashanti's announcement that it will close another 3.8m ounces of hedging this year.

"This means the global book will be only 15-17m ounces at the end of the year. The support the market has had from producer buybacks is coming to a close, volumes are likely to significantly decline in 2009 and beyond."

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