Gold May Be Where You Don't Find It
Monday, June 04, 2007 - FreeMarketNews.com
Just a few years ago, anyone speaking about the evils of miner gold hedging – where future production is sold at current prices – in a bear market – would have been scoffed at or ignored. After a $400 per ounce rise in the gold price, with more gains likely to come, the tune has decidedly changed.Investment Rarities' Ted Butler, long a critic of hedging wrote:"In my last article, A Clear Parallel, I lamented the fact that no industry insider had ever publicly disparaged the moronic and manipulative practice of metal leasing and forward selling, although I was sure it was discussed plenty in private. I’m happy to offer a retraction...Kudos to Mr. Cockerill for being the first to stand up and speak the truth."Parallel to Butler's writing about the hedging issue, Reuters quotes Ian Cockerill, head of South Africa's Gold Fields Ltd. who stated:"There is a lack of exploration expenditure and a lack of discovery of any significant size. The world is consuming 85 million ounces of gold a year but the industry is by no means finding and replacing that amount."Most analysts now recognize hedging was a fault -- it is like eating your young -- we have come to recognize the craziness of selling something at a price delivery point in the future which is at a price that guarantees that you cannot replace it."
Just a few years ago, anyone speaking about the evils of miner gold hedging – where future production is sold at current prices – in a bear market – would have been scoffed at or ignored. After a $400 per ounce rise in the gold price, with more gains likely to come, the tune has decidedly changed.Investment Rarities' Ted Butler, long a critic of hedging wrote:"In my last article, A Clear Parallel, I lamented the fact that no industry insider had ever publicly disparaged the moronic and manipulative practice of metal leasing and forward selling, although I was sure it was discussed plenty in private. I’m happy to offer a retraction...Kudos to Mr. Cockerill for being the first to stand up and speak the truth."Parallel to Butler's writing about the hedging issue, Reuters quotes Ian Cockerill, head of South Africa's Gold Fields Ltd. who stated:"There is a lack of exploration expenditure and a lack of discovery of any significant size. The world is consuming 85 million ounces of gold a year but the industry is by no means finding and replacing that amount."Most analysts now recognize hedging was a fault -- it is like eating your young -- we have come to recognize the craziness of selling something at a price delivery point in the future which is at a price that guarantees that you cannot replace it."
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