Gold mining companies in the second quarter reported their first consecutive quarterly net hedging in 10 years, driven by new hedges by small producers, metals consultancy Thomson Reuters GFMS and French bank Societe Generale said on Tuesday.
For the full year, the global hedge book is expected to result in a net addition, the first annual net hedging since 1999, even though most major gold miners have already eliminated their hedges and fully exposed their output to market prices, the report said.
Hedging helps producers lock in prices for future output, but can backfire if spot metal prices rise above the hedged price. The buying back of outstanding hedge positions was a key element in gold's rally over the past decade.
The second quarter saw 0.19 million ounces (6 tonnes) added to the global hedge book, which stood at 5.07 million ounces (158 tonnes) at the end of June.
The largest addition to the global hedge book was from Australian gold miner Alkane Resources, which entered into 0.09 million ounces (3 tonnes) of forward sales against one of its gold projects, the report said.
The report said the volume of net hedging is expected to total one million ounces (32 tonnes) for the full year.
Major gold mining companies are still against hedging amid gold's decade long bull market, the report said.
In the face of a strongly rising gold price, the pressure is currently still on company management from investors to retain full exposure to gold prices, the report said.
AngloGold Ashanti, Africa's biggest gold miner, was the last major producer to eliminate its hedges. It did so during the fourth quarter of last year.