I have never thought hedging was the primary cause of low gold prices,
so lifting hedges may not push gold higher either.
Hedging (IMHO) has become less important over the last 5 years. If you look at the supply/demand numbers back in 1997, there was a 1756mt gap between total demand and what was supplied by primary (mine) and secondary (scrap) production, which needed to be filled by central bank sales, forwards sales, dis-investment and other "evil" activities. The gap dropped to 1568mt in 1998, 1176mt in 1999, and 1170mt in 2000.
For 2001, I was expecting a gap under 1000mt (and everyone called me nuts because mines were supposed to be cutting back and demand was strong) Reality is mine production went up from 2573mt to 2595mt, scrap from 602mt to 695mt, and demand dropped from 3743mt to 3483mt, leaving a gap of only 888mt (all data from last week's GFMS report) Sure 101mt of net hedges were bought back in 2001, but it had almost no impact relative to the other factors. I obviously don't think hedging is a big deal on the macroeconomic level, might be on the micro-economic level if you are a company that did it wrong ! |
