And down exactly $100.00 since the second post below, dated Sept. 23.
I know there will be whiff of snark in some quarters to the effect that Barrick's hedge marks the bottom, they couldn't trade there way out of a paper bag, etc.
I don't do snark very well. So to compensate I'll get hyper-sincere: I would look at every uptick as an opportunity to dump supply on the market.
And, maintaining the hyper-sincerity, Q4 of 2013 will see the largest 92 day production of gold in human history. I mean that sincerely.
From Bloomberg:
Four years after Barrick Gold Corp. (ABX) stopped hedging bullion sales, its next chairman, John Thornton, says the practice makes sense and is worth considering.Here's the prophecy from
Thornton, a former Goldman Sachs Group Inc. president and currently Barrick’s co-chairman, spoke yesterday after the world’s biggest producer of the metal announced he would succeed Chairman Peter Munk next year.
Barrick spent at least $5.6 billion in 2009 to get out of fixed-price sales contracts as it bet on rising gold prices. The metal is heading for its first annual drop in 13 years, having declined 27 percent so far in 2013. That slump has helped to erode earnings and prompted gold producers to take at least $26 billion of writedowns this year,
“As an outsider, I always thought it made great sense to hedge,” Thornton told reporters at Barrick’s Toronto headquarters. “I can’t understand for the life of me why that wouldn’t be an active topic that you would be carefully following at all times.”
Once a strategy used by Barrick and other major gold producers such as AngloGold Ashanti Ltd., hedging fell out of favor in the past decade as companies found themselves locked into lower prices as gold rose. Producers de-hedged 8.16 million ounces in 2009, according to a report from London-based researcher GFMS Ltd. the following year.
Thornton is right to suggest hedging is useful, said John Goldsmith, a Toronto-based fund manager who helps manage about C$5.6 billion ($5.3 billion) at Montrusco Bolton Investment Inc.
Ballooning Costs
“The smart companies are going to be the ones that use put options or enter into forward contracts for a portion of their current year’s production to guarantee that production, to guarantee that cash flow,” Goldsmith said by phone....MORE
Gold Miners: A Fool And His Money (GDX; GDXJ; GLD)
There have been quite a few commenters and pundits making wordy cases for gold miners recently and if they don't knock it off I'm going to start naming and shaming.See also a couple months prior to that November post:
Here's pretty much all you need to know about the situation from Izabella Kaminska at FT Alphaville and she does it in under 500 words:
The gold producer wild card
BNP Paribas thinks gold is getting closer to the precipice.
How quickly it’s likely to be pushed over will be determined by the rate at which producers accelerate their hedging activity....MUCH MORE
UPDATED--Gold is Going Much Lower
Update: "JPMorgan Says "Buy Gold", Conspiracy Theorists Dazed, Confused".
Original post:
Comex gold settled at $1,332.50 on Friday, off $36.80 for the session. After the close it traded down to $1325.60.
From Izabella Kaminska at Dizzynomics:
All that glitters…
Gold goes up on non-taper, gold goes down on taper.
Is it really that simple?
Maybe.
Though I suspect that even without tapering it won’t stay supported for long. This is because QE has finally created the conditions necessary to reward equity investing more than they do gold investing.
And without the likes of India buying, there isn’t enough liquidity heading into the market to support new highs. And new highs are necessary if you can’t hedge your gold positions at a positive rate.
The more QE happens, the greater the chance of negative rates on traditional risk free assets. But gold is a useless alternative if it can’t be hedged at a positive rate (i.e in a contango).
Gold backwardation is a market condition that deprives the gold investor from the ability to replicate a positive yielding safe security out of gold....MORE
