De-hedging Slowed in First Quarter of 2010
Only 0.78 Moz (24t) was removed from the global hedge book in the first quarter of 2010, reported the GFMS and Société Générale. The Q1 2010 Hedge Book analysis was released today.
The de-hedging represented a slow down from the rate recorded in the last quarter of 2009. The study found that Kinross Gold Corp. was the largest de-hedger and that Adamus Resources made the only significant hedge, 0.29 Moz (9 t) of forward sales in order to fund the Nzema gold project in Ghana.
"The balance of the producer hedge book is spread among numerous players, and we believe it more likely that we will see these positions run down over time, rather than in a spate of aggressive cuts by many of the holders. Coupled with our expectations for AngloGold Ashanti and Kinross, we believe the rate of de-hedging in 2010 will remain above the indicated delivery schedule, at around 3.00 Moz (93 t) for the year," reported the GFMS in its study.
GFMS expects producer de-hedging to amount to around 3.00 Moz (93 t) in 2010.
When a company de-hedges, it is closing out positions put in place to protect an asset from price swings in the market. De-hedging is usually done when an asset holder has a bullish sentiment and would like to participate in the upside of any anticipated price increases.
GFMS Ltd is a precious metals consultancy specialising in research into the gold, silver, platinum and palladium markets. It is based in London, UK,