Hedge funds slash bullish wagers on gold over Trump election win
Hedge funds and other large speculators boosted net-long positions by 11% to 197,362 as of Nov. 12, the lowest in 14 weeks.
Gold mining companies big and small are not looking forward to 2014, as most of them already know their situation is about to get worse.
Bullion prices have plunged almost a third this year, stopping a 12-year run of gains. The precious metal fell out of favour with institutional and retail investors since they braced for the US Federal Reserve to cut its monthly $85 billion bond-buying scheme, moving funds to equities and other riskier assets.
The sector, analysts agree, is likely to announce a series of fresh write-downs, mainly triggered by the need to re-evaluate the worth of their reserves, based on a market price that is $500 an ounce less than only a year ago.
But while this year’s write-downs have been mostly tied to the costs of projects, in 2014 gold miners will have to cut their land holdings value as well as the amount of precious metal they hope is in the ground, Jorge Beristain, an analyst with Deutsche Bank, told FT.com (subs. required).
World’s No. 1 producer Barrick (TSX, NYSE: ABX) is one of the top candidates for new write-offs. After a second-quarter loss of $8.6 billion and project devaluated more than $13 billion so far in 2013, Barrick’s stock is trading around the $19 mark, making it one of the worst performers in the sector this year. The company has slashed its dividend by 75% and has vowed to cut costs by selling non-core assets and reducing its workforce.
The Toronto-based company valued its gold reserves at $1,700 an ounce at the beginning of 2013, and has since lessened its price estimate to $1,250 an ounce.
Industry’s second-largest gold miner Newmont Mining (NYSE:NEM), based its statements on a $1,400 per ounce price, said early in the year that a $100 fall in the gold price would cut reserves by 7.6%
Goldcorp Inc. (NYSE: GG) stock is down about 41% since the beginning of 2013, diving deeper since July, when it logged a net loss of about $2 billion.
Australia’s top gold producer, Newcrest Mining (ASX:NCM), (TSX:NM) also had a difficult year, reporting this summer its biggest loss ever, which pushed total write-downs to $5.73 billion.
Even before the gold price debacle began this year, bullion producers were facing challenges. As a PwC report shows, from the 40 main mining groups by market capitalization, four of the five that lost most value in 2012 were indeed gold producers – Barrick Gold, AngloGold Ashanti, Goldcorp, and Newmont Mining.
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