Gold miners show few signs of hedging to lock in high metal prices
May 28, 2025 5:45 PM ET
By: Carl Surran, SA News Editor
Gold prices have been hovering near historic highs, and margins for gold miners are at 50-year highs, but the miners are showing few signs of rushing to lock in the recent gains through hedging strategies, The Wall Street Journal reported.
Hedging became unpopular across the gold mining industry after producers lost out on billions of dollars in potential revenues during a bull run in the 2000s because they had committed much of their output to hedges at significantly lower prices, frustrating investors.
As a result, gold producers now typically sell future production at a fixed price only when required to support financing for new mines; companies say shareholders invest in their stocks as a way to bet on the price of gold, and that hedging damps this, according to the report.
Net producer hedging totaled just five metric tons in Q1 2025, according to data from the World Gold Council, an addition that followed big cuts to the combined industry hedge book last year, including a 19-ton reduction during Q4 2024 alone, as miners sought to exit hedges set at below-market prices.
Any signs of a change in appetite for hedging are closely watched because of the impact it can have on market supply; in the 1990s, hedges were a significant source of global gold sales, holding down prices.
At ~180 tons, total hedges today remain negligible compared with the start of the 2000s, when the gold mining industry reported hedges of ~3,000 tons.
Gold futures settled lower Wednesday for the third session of the four, as markets remain unsure of how to cope with the fallout of President Trump's tariff plans.
Front-month Comex gold ( XAUUSD:CUR) for May delivery ended -0.2% to $3,293.60/oz, and front-month May silver ( XAGUSD:CUR) finished -0.4% at $33.00/oz. |
