THE GAME IS........
ON
Feb. 8-MAR--
[B] Bridge Futures Outlook: Gold sensitive to mine hedge plans
By Melanie Lovatt, Bridge News
New York--Feb 8--COMEX gold futures prices are likely to stay
vulnerable to any changes mining companies make to their hedging plans
after gyrating the past few days on moves by two Canadian producers. The
April contract was pushed up a huge 8% Friday after Placer Dome said it
would suspend its hedging this year. It then tumbled $ Monday when fellow
Canadian gold miner Barrick Gold Corp. failed to meet expectations that it
would repeat Placer's move.
* * *
Instead, Barrick announced it had only halved the gold under its
hedging program, leaving it with a relatively large 9.8 million ounces
still hedged.
Market players are still nervously awaiting further news from
producers in North America, Australia and South Africa to see whether they
would follow Placer Dome and suspend hedging activities.
Although many gold market players have suggested that central bank
gold sales were the culprit behind the metal's drop to 20-year lows in
1999, others maintain that hedging--price protection taken out in the form
of forward gold sales and assorted option strategies--also played a part
in capping prices.
Reductions in the amount of gold hedged by producers are bullish for
the market, and the dramatic price reaction Friday and Monday illustrated
this point, analysts and traders said.
Nevertheless, some of them think that other mines must follow suit
before gold prices can be re-energized. Lately gold's reaction to recent
daily stock market corrections or tumbles in the dollar or bonds has been
anemic, even though it is supposed to act as a safe haven or alternative
investment.
With central bank gold sales likely to continue to exert pressure on
the market, if other mining companies cut their hedging programs, they
could provide gold with the shot in the arm needed for more buoyant
prices. End
Bridge News, Tel: (212) 372-7562
Send comments to Internet address: futures@bridge.com
[slug: Futures-Outlook]
The Bridge ID for this story is 01275 |
