Global Gold De-Hedging to Slow Dramatically in the Second Half

Source:

...Both studies report on an improvement in the marked-to-market value of the hedge book at the end of Q2 by comparison with the end of Q1,although here they diverge, with Société Générale calculating it to be $9.8 billion and Fortis weighing in with $9.0 billion.

Two houses, Société Générale and Fortis, have released their individual quarterly reviews of the global gold mining hedge book, compiled respectively by GFMS Ltd and Virtual Metals. While their details and slant differ slightly, the essential conclusions, reassuringly, are broadly similar.

The Société Générale review concludes that producer de-hedging generated 126 tonnes of effective demand in the quarter to leave the delta-adjusted global producer hedge book at 18.8 million ounces or 585 tonnes at the end of June, which GFMS estimated to be the lowest level since 1987, the year before gold loans came to the fore. The Fortis book pitches the quarterly number lower, at 109 tonnes, to leave the book at 18.7 million ounces or 582 tonnes. Both studies point to the prominence of the changes in the AngloGold Ashanti hedge book during the quarter and also they both highlight the fresh hedging from Wega Mining, which finished its project hedging for its Inata property late in the quarter...

Both studies report on an improvement in the marked-to-market value of the hedge book at the end of Q2 by comparison with the end of Q1,although here they diverge, with Société Générale calculating it to be $9.8 billion and Fortis weighing in with $9.0 billion. Furthermore, as a result of what Société Générale describes as "a direct function of AngloGold significant bullion purchases during the period", the study estimates that the realised gold price achieved over the quarter across the book as a whole was down by $158/ounce or 18% to $742/ounce, equivalent to a $155/ounce discount to the period average spot price. The study suggests that excluding the AngloGold exercise, the realised price across the book would have been closer to $869/ounce.

Related Articles

Get Our Streetwise Reports Newsletter Free

A valid email address is required to subscribe