The Hindu Business Line : Gold de-hedging may dip this year

THE forecast base level of gold de-hedging in 2005 is estimated at just under 10 million ounces, down from the previous year, according to the latest global hedge book analysis report of GFMS.

However, the actual figures will depend on the intensity of buybacks and the level of new hedging, the consultancy added.

Gold de-hedging touched 3.64 million ounces during the last quarter of 2004, showing a 6 per cent quarter-on-quarter cut in the global position. The cut took outstanding positions at end-December to levels last reported in 1996, a provisional 57.1 million ounces, equivalent to 72 per cent of annual mine production, the report pointed out.

The year-on-year decline was 14.30 million ounces, the biggest annual reduction in outstanding producer position since the de-hedging cycle began in 2000.

The fourth quarter was a relatively quiet period with many producers having achieved (or almost achieved) stated de-hedging targets by the end of September. A further factor was the strong price rally, which reduced the window of opportunistic buybacks or accelerated deliveries, with gold having posted a 16-year high of $454.20/oz in early December, the report observed.

Higher prices hurt jewellery offtake in Q4, but perhaps a little less than expected with Turkey and India performing well. The average price received by producers was $ 421.21/oz with a range starting from a low of $379/oz to a high of $512/oz. The price received fell short of the average spot price by roughly $ 13/oz, a marked deterioration from the previous quarter when received prices were just over $ 5/oz lower than the period average of $ 401.30/oz.

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