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Comex gold ends at high as bulls get confident

NEW YORK: Comex gold rallied again on Thursday and bears were on the defensive in the bullion markets after more gold producers, including the world's largest, committed to reducing their gold hedge sale programmes.

Prices jumped three percent on optimism that a shareholder backlash against hedge policies was turning the mining industry away from selling future production forward, a practise which is profitable when prices fall but, ironically for a gold company, can mean big losses when bullion prices rise.

"There clearly seems to be for now a positive tone in the market as related to expectations of reduced hedging," said William O'Neill, director of futures research at Merrill Lynch.

Comex April gold settled up $10.10 at $318.70 an ounce, its priciest since spiking to a four-month high of $326.90 an ounce on Monday. Extending Wednesday's $6.90 rise, it topped at $319 just before closing, off an overnight low of $308.50.

Spot gold was quoted late at $315.55/6.55, up from London's late fix at $309.00 and $305/$306 at Wednesday's close.

South Africa's AngloGold Ltd., the number-one miner, said on Thursday it would continue delivering into its hedges in 2000, signalling lower levels of forward sales.

The company, which also posted a disappointing six-percent slide in December quarter results, said it believes that physical market fundamentals are positive for gold and that investor interest in the metal should improve.

Another South African Western Areas Ltd. said it had closed out its forward sales for the next two years.

Canada's Placer Dome, the world's fifth-largest gold producer, sparked a $32 bullion rally to $319 on Monday after the company said Friday it was suspending its hedge programme.

"Things are changing here, the sentiment, the psychology of market," said Ian MacDonald, manager of bullion trading at Commerzbank in New York. "Maybe after 20 years of being a bear market it is trying to tell us something: 'enough is enough.'"

Hedging made sense when bullion was skidding toward a 20-year low of $251.70 an ounce on August 25. But these forward sales and derivative structures, used to protect the value of unmined assets in bear markets, nearly ruined some miners when gold spiked from near $260 in September to $338 on Oct 5.

The highest-profile victim of overhedging last year was Ghana's Ashanti Goldfields Ltd, which saw its share value fall to a new low Thursday as its future hung in the balance. The company is still though to have shorts to unwind.

On Thursday, Ashanti said it was talking with its creditors after an Accra court effectively froze its assets and ordered the company to call an extraordinary general meeting over corporate governance.

March silver shook off gold's strength, ending down 0.5 cent at $5.425, in a range of $5.35 to $5.47. Spot silver was quoted at $5.35/38, versus the fix at $5.36 and the previous close at $5.34/37.

Meanhile, platinum and palladium backed off respective 10-year and record highs, after Japanese traders reported that Almazjuvelirexport, Russia's sole platinum group metal (PGM) exporter offered spot palladium to Japanese importers for the first time since Jan 21.

Nymex March palladium fell $10.15 an ounce to $580 and April platinum dropped $11.70 to $517.90.

At its $598 contract high Wednesday, palladium had advanced almost $150 since early January. Platinum as also soared, chased by funds and frantic auto catalyst makers facing a dire shortage of metal from Russia, producer of 70 percent of the world's palladium and 20 percent of platinum.

Russia's sporadic palladium shipments this year have not satisfied demand. At the same time, almost no platinum has arrived on world markets from Russia since the end of 1998. -Reuters