Globalgold hedging saw the largest decline in percentage terms on record in the firstquarter of 2008 as an 18% or 4.8m ounces reduction brought the global gold bookdown to 22m ounces. But the Fortis Hedging and Financial Gold Report saysdehedging volumes will significantly decline in 2009 and beyond.  

Thequarterly report issued by the VM Group said AngloGold Ashanti, Barrick, Buenaventura and Newcrest reducedtheir hedge books with a total of 4m ounces in the quarter. AngloGold Ashanti reduced its hedge bookwith 1.2m ounces, Barrick converted 1.1m ounces of fixed-rate contracts tofloating-rate contracts, Buenaventura closed out its entirehedge book of 0.9m ounces and Newcrest cut its hedge book by 0.7m ounces to0.2m ounces. 

Thebalance of the reduction in the global hedge book came from 32 differentcompanies making reductions in their hedge books.  

Thefirst quarter of 2008 also saw the lowest total new hedging since the secondquarter of 2002, at 7,137 ounces.

TheVM Group has increased its forecast for hedging in 2008 to 10-12m ounces on theback of AngloGold Ashanti's announcement that itwill close another 3.8m ounces of hedging this year.  

Thismeans the global book will be only 15-17m ounces at the end of the year. Thesupport the market has had from producer buybacks is coming to a close, volumesare likely to significantly decline in 2009 and beyond.

Themark-to-market valuation of the global book improved slightly in first quarter2008 at an estimated negative $11.2bn, $0.1bn better compared to end offourth quarter 2007, said the report. The improvement was small despite thelarge reduction in hedging, due to the $97/ounce increase in the gold price inthe quarter.

Exchange-tradedfunds suffered its worst month on record for outflows in April. TheStreetTRACKs product fell by 62.5 tonnes, but has made a slight recovery since.

However,official gold sales have slowed as Central Bank Gold Agreement signatoriesbattle to reach their 500 tonne maximum sales limit.

Unlessa central bank resumes sales, it is likely that they will collectivelyundershoot the limit by more than 100 tonnes.