Going for gold

In the past 12 months the gold price has fallen by almost 25%. The contrarian approach suggests that now might not be a bad time to buy, but is the time right and if so, what stocks should you look at?

By Intelligent Investor · 24 Mar 1998

By Intelligent Investor ·
24 Mar 1998

WMC abandons hedging

Western Mining Corporation (WMC), the second largest gold producer in Australia, recently announced that it had effectively sold off its gold price hedging for its post 2000 production. Hedging is basically an insurance policy - gold producers sell gold contracts to ensure they can sell their future production at a guaranteed price. It removes the uncertainty of price fluctuations.

WMC did this to take advantage of the current low gold price and secure a large profit. This is likely to mean that WMC believes inflation will again start to rise and that gold will return to its historical hedging role.

It also seems that industrial and commercial demand for gold is on the rise, which should help push the price up. This good news though seems a little way off and there may be more pain before gold once again take its place as the most precious of metals.

IMPORTANT: Intelligent Investor is published by InvestSMART Financial Services Pty Limited AFSL 226435 (Licensee). Information is general financial product advice. You should consider your own personal objectives, financial situation and needs before making any investment decision and review the Product Disclosure Statement. InvestSMART Funds Management Limited (RE) is the responsible entity of various managed investment schemes and is a related party of the Licensee. The RE may own, buy or sell the shares suggested in this article simultaneous with, or following the release of this article. Any such transaction could affect the price of the share. All indications of performance returns are historical and cannot be relied upon as an indicator for future performance.

Going for gold

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Going for gold

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