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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: Rarebird who wrote (56185)	7/13/2000 3:15:11 PM
From: pater tenebrarum	Read Replies (2) \| Respond to of 116811

RB, there are some producers who got into the game early on, at much higher prices. that made sense, and they show decent profits on their hedge books (AU and ABX being prime examples). however, as this caught on, the collective hedging efforts soon turned into a somewhat absurd farce, as total producer hedging began to feed on itself by depressing the PoG. the late-comers and those that were forced by their banks to hedge in the face of plunging prices (especially last year) have nothing - zero - to show for their efforts. most in fact have hedge books with a negative mark-to-market value now. imo, the solution is quite simple: flexibility is the name of the game. stop hedging when the PoG falls below replacement costs (at about $350/oz.). hedge when it has had an extended bull run, and even then, try to do it in such a way as to not cap upside surprises, i.e. by buying puts instead of selling forward (TVX does it that way). don't finance your puts by selling calls, a la ASL - that's deadly. the big advantage is that your counterparties are then interested in keeping the PoG above the floor price established by the put strikes - all of a sudden everybody's interested in keeping the price high. if the world's biggest producers could get together and devise a strategy that involves supply reductions in times of low prices, and a flexible hedging policy as described above, we'd all be better off - producers as well as shareholders. to me these things are so common sense obvious, that i must conclude that these chaps are really dense...they always argue that the PoG is beyond their control - i say bullsh*t. they could do a lot more to improve the situation. eschew hedging, do something to promote demand, etc. only very few show some initiative...shareholders should vote with their wallets and support those.