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Hedges work if done correctly ... the question one should ask themselves is whether ABX has done it correctly. IMO "NO"! Maybe 2,5 years ago or 10 years ago the answer would have been yes as the previous largest hedger was Sons of Gwalia out of Oz (set up by Volker who was aware of the US Fed's attitude to gold and the meaning of a depression).

Hedging is great to finance capital acquisitions and shore up income for the next 1 to 2 years yet the amount of hedging should be limited to the standards as set in the industry. If you want to be a miner then be a miner - if you want to be a hedging company then go and bark at LTCM do not throw all your eggs in one basket as ABX has done for the next 10 years on a continuous rollover basis.

Gold has been in a bear market for the last 20 years yet the simple fact of the matter is that 'the times are a changin' and with the Washington Agreement last September gold has no where to go but up.

The major investment houses (in particular Goldman Sucks) have a large interest in ABX and at the same time have undertaken the majority of gold hedging. If history doth repeat itself then Goldman Sucks has a pecuniary interest in shorting the gold market and keeping prices low (as they already have a barbed arrow from Ashanti sticking then in the rear end). The price of gold is not subject to the supply and demand equation most commodities have to deal with, as the derivatives in gold, play the leading hand. A short position last September caused the gold to spike up and that short was never filled - leaving a question over the actual delivery at COMEX.

The shorters are well short of meeting their delivery so they contracts have been rolled over adinfinitum pending the location of actual physicals to deliver. In the meantime actual demand has exceeded supply by some 2,400 tonnes per annum so the next 2 to 3 months will be interesting as to how soon ABX can unwind.

Puh-leese do not give me the rhetoric on 'this archaic dusty metal' ... 'has no further use in todays economy'... 'no profit in holding this relic'... all that garb as it is noveau economics based on a dollarization policy that has effectively been tramped by the Washington Agreement. I can guarantee you that 15 European Central Banks have a lot more dignity than what Alan Greenspan, Summers (nee Rubin) [ex-Goldman Sucks by the way so I expect that their policies co-incide with their vested interests] have had throughout their lifetime and the inherent value of gold will be gradually restored to what it should be.

Pride throughout Europe is a big thing and making the reserves of gold a necessity with the Europe Central Bank and the Euro will allow the pride to be restored regardless of the efforts of the US Fed's who see the PoG as a problem on inflation not in reality the real thing - a price!

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