Back to the future? Hedging on agenda as gold prices fall -GFMS

Thu Dec 5, 2013 1:07pm EST
 
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* Hedging more appealing for miners after 26 pct price fall

* Locking in future prices still a 'tough decision'

* Barrick says may consider hedging future output

By Jan Harvey

LONDON, Dec 5 (Reuters) - Selling gold that has yet to be mined to lock in a fixed price - a practice used by mining firms that went out of vogue as prices surged - may make sense for them again after a more than 20 percent drop in prices this year.

Hedging, or selling production forward, shields mining companies from falling prices but stops them benefiting from gains. It fell out of favour during gold's 12-year bull run, which peaked in 2011 with prices near $2,000 an ounce.

In an interview on Thursday with the Reuters Global Gold Forum, metals consultancy Thomson Reuters GFMS analyst William Tankard said this year's 26 percent drop in gold prices to around $1,230 an ounce makes such a move a much more pressing consideration for miners.

"For some years now, GFMS have been suggesting that as the price cycle turns ... we would see a return to hedging," he said. "This call has at times tested our conviction as we would have expected to see a bit more activity than we have to date."

John Thornton, the incoming chairman of top global gold producer Barrick Gold, said on Wednesday that he would consider a hedging strategy once more, given the volatility in the gold price.   Continued...