An article in the UK’s The Telegraph raises the potential for a return of large forward gold sales by producers, a practice “that killed gold prices the 1990s”.
- Gold producer Petropavlovsk will pre-sell 55pc of its future output planned for the second quarter of 2014
- A Nomura analyst said this may signal the return of “structural hedging” across the industry, as companies lock in forward contracts
“This could increase the pressure on the spot gold price over the coming years,” he said. The risk is a vicious circle as hedging leads to lower prices, leading to more hedging.
Risk of vicious circle for gold as hedging returns
The curse of hedging that blighted gold in the 1990s is making a comeback, and threatens to loom over the market like Banquo’s ghost.
