Mr. Day: Investors and others looking for some asset class that will protect their assets, if the financial assets fall apart. And that really started at the end of September/beginning of October. We really saw that kind of buying coming in. There is always some of that, of course. It is a very traditional thing in Europe for large portfolios to have 5% of their assets in bullion as a permanent hedge on the rest of the portfolio. But we've certainly seen much more of that buying in the last nine months than we typically do.
TWST: You also said there is less hedge buying than what we usually see.
Why is that?
Mr. Day: Two things really. Typically companies hedge for two reasons.
They hedge when they are building a new mine to raise capital upfront and to
lock in a certain price, to ensure that the mine is profitable in its early
years, etc. The other one, frankly, that we saw a lot of in the 1990s and early
2000s, was really more speculative hedging, companies which wanted a sell
forward because they thought the price was high and it was a good time to lock
in the price and so on. But they didn't need to do it; it wasn't because they
were building a new mine or anything like that. You've seen very, very little
of that recently. Typically, you get that type of hedging when people are
cautious on the market; when people are bullish on gold. Obviously, you are not
going to lock in the price if you think it is going higher. So, in this kind of
environment, we've had very little of that. The other thing is that investors
buy gold mining stocks because they think the price of gold is going up. They
certainly don't want the mining company locking in a price if they think the
price is going higher. And companies heard from a lot of angry shareholders
when they were selling their gold at $650 or $700 when the price was $850 or
$900.
Tickers included in this excerpt: ANV, FNV:TSX, GG, MD:TSX, RGLD, VGQ:TSX
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