Still, there are encouraging signs for the miners, including dwindling levels of hedging activity.
“Low levels of interest in hedging were illustrated by net hedging of just 5t during the first quarter. Shareholders remain unreceptive towards the activity and we expect supply from this source to stay relatively low (certainly compared with historical levels) over 2015 as a whole,” according to the World Gold Council. “The outstanding global hedge book currently hovers around 200t, up from below 100t at the end of 2013. A number of producers initiated small positions in 2014, but were eclipsed by both Polyus Gold’s hedge of around 88t of production and Fresnillo’s roughly 47t hedge in the closing months of the year. Deliveries into these positions will eat into the outstanding hedge book, but spread out over the next three to- four years the quarterly impact will be minor.”
Miners hedge production to lock in current prices for future output and the lack of recent hedging could be a sign that the companies extracting gold from the earth do not expect the yellow metal to fall much further. [This ETF is Ready to Rally]
Market Vectors Gold Miners ETF
Tom Lydon’s clients own shares of GLD.