TORONTO (miningweekly.com) – The gold industry may see a shift to positive hedging activity as early as 2012 or 2013, GFMS chairperson Philip Klapwijk said on Wednesday.

With prices at record levels and rising, gold miners have been steadily reducing their forward sales for the most of the last decade, to gain exposure to the stronger market.

In the second half of 2009, the world's biggest gold-miner, Barrick Gold, announced it would eliminate all its fixed-price hedges, and also removed a large chunk of its floating-price contracts.

Overall, the global hedge book was almost halved in 2009, to less than 250 t of gold, after 242 t was removed during the year.

“This leaves very little hedging to be done,” Klapwijk said in a presentation to analysts in Toronto.

“We have to ask the question, at what point could we start to see some of these positions put back on again?”

Klapwijk does not expect to see positive hedging activity from the gold producers this year or in 2011, he said.

However, looking beyond that, hedging may become a factor on the supply side of the gold market in the next two or three years, particularly if there is a correction in prices,

“These are the sunset years of dehedging that we are seeing here,” he commented.

“The risks are now going to be stacked to the possibility of fresh producer hedging – perhaps not at a time when prices are still high or moving higher.

“But if we were to see a massive correction in gold prices at some point in the medium term, I think we would probably see producer hedging come back into play and driving prices even lower than they would otherwise have fallen to.”

The metals consultancy launched the latest version of its Gold Report in Toronto on Wednesday.

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