Tuesday May 21, 1:28 PM
Rising gold prices means less hedging-analysts
SYDNEY, May 21 (Reuters) - A rising gold price meant Australian producers will continue to reduce their forward sold hedge positions, analysts said on Tuesday.
Gold jumped about US$5 to nearly $317 an ounce overnight, the highest in 27 months, leaving more of Australia's estimated 24.3 million ounces of hedges outside the money, the analysts said.
Gold has risen 14 percent since the start of the year when the price was $278 an ounce.
Australia is the world's third largest gold producer, mining some 300 tonnes a year.
Hedging -- selling as yet unmined nuggets at fixed prices to lock in revenue and protect against a dropping bullion market -- has fallen out of favour among the world's biggest mining houses, who claim it stymies upward price moves.
Also, rising markets in the past have punished some heavily hedged companies, which actually lost money when they were forced to buy gold at higher prices than they were able to sell under options agreements.
However, a weakening U.S. dollar has taken the shine off unhedged portfolios in gold producing nations outside the United States, analysts noted.
Still, the latest price jump pushed shares in leading Australian miners -- all with some degree of hedging -- higher as gold's climb outraces deterioration in the greenback.
Gold in Australian dollars was worth only A$545 an ounce on January 1, when one Australian dollar fetched only 51 U.S. cents.
The same ounce on Tuesday is worth A$574 an ounce, despite one Australian dollar buying 55 U.S. cents.
In afternoon trading, Aurion Gold Ltd was nine cents or three percent higher at A$3.19, Newcrest Mining Ltd was up six cents or 0.9 percent at A$6.94, while Lihir Gold Ltd was four cents or 2.9 percent higher at A$1.44.
"Australian miners were benefitting from higher prices," Australian Gold Council chief executive Tamara Stevens said.
At the close on May 20, the Australian Stock Exchange/Standard & Poor's gold index had risen 36 percent in 2002.
($1=A$1.82) |
