Hedging Coming Back?

Credit Suisse analyst Tom Kendell has seriously raised the possibility of gold producers going back to hedging again, although with less complex instruments than were used in the past. By doing so, he intimates of a risk of gold declining.

“Hedge is not a four letter word,” he quipped as he told delegates a term that would also be increasingly heard in the financial markets during 2011 was “normalisation” and that was not necessarily good for the gold price.

He told delegates that, “the fact that financial market conditions are returning to normal means that mid to long-term bond yields are rising and will continue to go up.
“In theory, that is not good for gold because you do not get a return on investment in gold but there are some deep-rooted structural issues in the United States which still remain positive for gold.”

Although not a gold bear, he does raise the possibility that economic recovery will continue to drag gold down. Gold miners implementing this advice would make for a real reversal, as some of them have spent a lot of money removing hedges from their books.


This may just be a disguised sales call for Credit Suisse hedging products, but it does speak to a relative lack of bullishness right now. We all swim in the times, and it looks like the ebullience of late last year has ebbed. Not to be cynical, but this boat-floating is a sign that gold could go up later this year. It indicates a wall of worry still in place.