Small-scale gold hedg­ing likely to stay

Banking Frontiers - - Research Notes - Gold - Me­hul@bank­ingfron­tiers.com

De­liv­er­ies into ex­ist­ing gold hedge po­si­tions slightly out­weighed fresh hedges, lead­ing to over­all net de-hedg­ing of 5t in Q2. De-hedg­ing for H1 to­taled 22.5 tonnes, in stark con­trast to the 72.5 tonnes of hedg­ing in H1 2016. The global hedge­book now stands at 228 tonnes, 22% lower yoy. Higher lo­cal prices in April and June trig­gered hedg­ing by some Aus­tralian and Cana­dian mines: for ex­am­ple, in June, Gold Fields an­nounced it had hedged 75% of its H2 2017 Aus­tralian out­put to pro­tect cash­flow dur­ing con­struc­tion of the Gruyere pro­ject. Pro­ject and debt fi­nanc­ing were again the pri­mary mo­ti­va­tions for gold hedg­ing rather than any change in sen­ti­ment. But spo­radic small-scale hedg­ing, which can be use­ful for manag­ing fi­nanc­ing needs, is likely to re­main a fea­ture of the in­dus­try.

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