Newmont is keen to remove Normandy's present hedging strategy, saying it would unwind hedge positions when economically attractive.Newmont’s policy of not hedging is a de facto bet that gold prices will rise in the near future. Gold is currently priced at around $275 per ounce, and Normandy's hedges currently lock in forward prices until 2010 on around eight million ounces of gold at around $304 per ounce.
Many gold investors and miners have hedged their gold positions and future production by selling a future price using options or futures just beyond the current spot price. But this assumption that gold prices will continue to be range-bound leaves such positions susceptible to large losses if the gold price spikes. But such a surge in prices would mean Newmont’s anti-hedging policy would bolster its profits.
The week on Risk.net, July 7-13, 2018Receive this by email