Mining companies are likely to cut the outstanding gold hedgebook by some 20 tonnes this year, precious metals consultancy GFMS said in a report on Friday, after they reduced remaining hedges by 6 tonnes in the second quarter.
The company said in a quarterly report on the global gold hedgebook that most of the cuts came as part of scheduled deliveries or options expiries, rather than concerted moves to remove hedge cover.
Hedging future output allows producers to lock in guaranteed prices, but it can backfire if the price of spot metal rises above the hedged price.
The buying back of outstanding hedge positions was once a key element of demand, but its impact diminished after a majority of large miners closed their hedgebooks completely.
"Over the first half of 2012, producers' activity accounted for just 253,000 ounces (8 tons) of demand in the gold market," GFMS said in its latest report. "The market impact of net producer hedging activity remains limited". . .View Full Article