Don''t be preoccupied with the short term for the gold price

Gold Prices Gain as Big Miner Abandons Hedging Strategy

Bloomberg News in The New York Times

November 22, 2003

a href=http://www.nytimes.com/2003/11/22/business/22gold.html?http://www.nytime...
ex=1155877200amp;en=199a4465d0368109amp;ei=5035amp;partner=MARKETWATCH

Gold futures in New York rose for the first time in three
days yesterday after Barrick Gold, the big producer,
said that it was abandoning the practice of selling gold
before it is mined.

Barrick's plan is part of a shift away from so-called
forward sales, the hedging strategy that producers
began using heavily when the price of gold touched
a 20-year low in 1999 and there were fears of even
further declines. Since then, gold has soared. A
decline in hedging has helped accelerate the bullion
rally over the last two years by forcing customers to
buy on the spot market.

quot;The market is excited that Barrick's not going to add
to the hedge book for the next 10 years,quot; said David
Gagliano, an analyst at Credit Suisse First Boston in
Toronto. quot;They have the biggest hedge book in the
industry. It's a sentiment shift.quot;

Gold for December delivery rose $2.30, or 0.6 percent,
to $396 an ounce on the Comex division of the New
York Mercantile Exchange. Prices were down 0.5
percent for the week.

The futures touched $400.70 an ounce on Wednesday,
topping $400 for the first time since April 1996. Gold has
risen 14 percent this year after a 25 percent gain last
year, its best annual performance since 1979.

The Toronto-based Barrick will also consider reducing
some of its outstanding gold hedges, its chairman, Peter
Munk, said in an interview at a Euromoney-World Gold
Council conference in London.

As of Sept. 30, Barrick had 16.1 million ounces of gold
committed to forward sales. That is equivalent to about
three years of production locked in at fixed prices at a
time when gold has been rising.

The company's hedging strategy was partly responsible
for the departure of Randall Oliphant, Barrick's former
chief executive. Shares of Barrick that are traded on the
New York Stock Exchange, which have risen 43 percent
in the last year, have trailed those of some producers
with smaller hedging positions, like Newmont Mining,
which is up 88 percent.

Gold prices rose on Mr. Munk's comments because
Barrick was quot;really the last of the big hedgers,quot; said
Graham Leighton, a vice president at the SG
Commodities Group, a unit of Socit Gnrale of
France.

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