Junior miners have to take refuge in times of high prices

Junior gold miners should hedge their output while prices are high, the editor of a gold newsletter said on Wednesday, going against a tide of opposition to hedging.

Most gold investors are opposed to hedging, or selling gold production in advance, and have forced major producers to liquidate their hedge positions.

In a contrary view, Marino Pieterse, editor of Goldletter International, said current prices near record highs provided a good opportunity for firms to lock in healthy returns and warned that a correction could take gold down to $1,100-$1,200 per ounce in coming weeks or months.

"The gold price is going up so fast, it doesn't have time to find an equilibrium," he said on the sidelines of the Mines & Money conference in London.

Investor buying through exchange traded funds (ETFs) has fallen off, and the market is vulnerable to liquidation by speculators who have built up heavy long positions, he said.

"What I want to recommend to every miner, specifically the midcaps with new mines, they should hedge again," Netherlands-based Pieterse told the conference.

"They should hedge at least part of their production to be sure they can safeguard their margins in the future," he added.

Major producers such as No. 1 Barrick (ABX.TO) and No. 3 AngloGold Ashanti (ANGJ.J) have been selling off hedge positions under pressure from investors, who blame hedging for previous weakness in the price.

"I am very bullish on the gold equity market, " Pieterse said. "Buy the gold equities and you can write options to secure it when things go wrong."

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