The report states that 83% of de-hedging reductions in the hedge book took place in the first six months of the year, making it the most significant factor in rising gold prices in the first half. In the second half, the focus shifted to gold investment demand as de-hedging slowed, said GFMS.
“Prices in the second quarter last year were being hit hard by investors bailing out as the Iraq war premium imploded, yet that’s precisely when we saw some of the heaviest de-hedging,” said Philip Klapwijk, chairman of the independent precious metals research consultancy. The rate of de-hedging was down one third from last year, but was still the second highest rate ever, he added.
GFMS said de-hedging should continue in 2004 to between 340 and 400 tonnes.