Global Gold Hedge Book Down to Just 236 Tons


". . .net mine supply in 2009 was reduced by 9% last yea"

The latest Global Hedge Book survey from Société Générale shows that by yearend 2009 the global delta-adjusted hedge book stood at just 236 tons, a far cry from the 3,064 at its peak in 2000. De-hedging in the fourth quarter was 125 tons, making up more than half the year's total of 246 tons. This means that net mine supply in 2009 was reduced by 9% last year, to 2,317 tons against production of 2,553 tons (GMFS figures).

The biggest changes came from Barrick Gold as it closed out the remainder of its fixed-price forward sales (ahead of its September 2010 target) and this elimination was also a major contributor to the improvement in the marked-to-market liability of the book, which contracted to -$2.9 billion in the fourth quarter. Barrick was responsible for 90 tons of the quarter's dehedging and 165 tons of the full year's activity (thus, the rest of the sector removed 35 tons in the quarter and 81 tons in the rest of the year). AngloGold Ashanti, which was the second largest de-hedger in the quarter (14t) is now the largest open book, at 108 tons—or 46%—of the outstanding position, meaning that the rest of the hedged population account for 128 tons. Polymetal was the third largest de-hedger, at 10 tons. The fall in the volume of outstanding options positions was largely due to contracts reaching maturity rather than any proactive unwinding.

The majority of the reductions to the book were through the forward sales component; at the end of December, forwards and loans accounted for just 44% of the book with the remainder in options. If the book is considered in nominal terms, then by yearend 2009 forward sales comprised only 23% of the total, while a year previously forward sales were 56% of total.

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