Legendary hedge fund manager and philanthropist George Soros has described gold as the only current secular bull market. And it is a bull market that has been gathering pace in recent months with the price of the yellow metal hitting a series of all-time highs and, at $1363/oz, it has now risen a staggering five-fold from its low of $257/oz in the spring of 2001.
Gold producers are clearly convinced that the commodity will be glistening for some time yet, having spent the best part of five years buying back their legacy hedges to give themselves full exposure to rising spot prices. AngloGold Ashanti, the world's third-biggest gold miner, has announced plans to wind up its hedge book by early next year, joining industry giant Barrick Gold in putting an end to the legacy of forward sales, which pre-dates the boom in gold prices.
In fact, the aggregate hedge book of gold producers now stands at 125 tonnes, which is only 5 per cent of annual mine production of around 2500 tonnes and less than 90 per cent of what the industry was hedging a decade ago. As a result, gold miners' profits, and returns to shareholders, are now almost entirely dependant on movements in the spot market.
It's also a decision that is looking shrewder by the day as there are very sound reasons to believe that the bull run in gold is set to continue for some time yet.
