MUMBAI | MONDAY, 5 SEPTEMBER 2016 ECONOMY & PUBLIC AFFAIRS 7. <

DILIP KUMAR JHA

Mumbai, 4 September

Gold producers raised theirhedge book by eight per centglobally in the April–June quar-ter, the highest in six years, asprotection from price volatilityand to save their margins.

Data compiled by preciousmetals consultancy GFMSThomson Reuters showed theglobal producer hedge bookamounted to 9.5 million ounces(295 tonnes) during the secondquarter of calendar year 2016, afourth quarterly increase andto its highest level since the sec-ond one of 2010. The quarter-on-quarter change amountedto an increase of 0.67 mn oz (21tonnes), led by 20 producers.

The increase from theMarch quarter showed min-ing companies expected aprice fall in the short term.Over April, gold continued totrade over a narrow range.News about the possibility oftwo interest rate increases bythe US Federal Reserve thisyear fuelled interest acrossrisky assets, driving gold andother safe-haven assets low-er. Gold slipped to $1,251 anoz, prompting companies tostrengthen their hedge book.On Saturday, it traded at$1,326 an oz in the benchmarkLondon spot market.

“Gold miners continued toembrace hedging amid strongprices into early July. Activityappeared to favour forwardsales over options contracts, apattern we do not expect tocontinue. With the deliveryprofile for the third quarterpointing to 1.37 mn oz comingoff the book, GFMS forecasts amodest de-hedging outcome toemerge,” it reported.

In April–June quarter,Australian gold miners addedthe highest amount to their

hedge book, about 12 tonnesand 29 per cent of the globalincrease in forward sales. As aresult, at end-June, forwardsales rose to represent 33 percent of the total nominal hedgebook, an increase of three percent from the previous quarter

Although the third quarterhas so far seen sparseannouncements of new hedg-ing activity, the report believesthe uncertainty over higherprices in 2016 would get moreproducers to join the hedgingclub. Should prices fail to breakabove $1,400/oz in the thirdquarter, producers may opt tosit on the sidelines while theirhedge books naturally unwind.

Prithviraj Kothari, manag-ing director, RiddiSiddhiBullions, advises gold con-sumers to buy on every low,amid expectation of a furtherrise in its price. “We do notexpect the US Fed to hikeinterest rates more than oncethis calendar year. This mightfurther strengthen the goldprice,” he added.

The delivery schedule atend-June indicated 1.37 mn oz(43 tonnes) of de-hedging wasdue during the third quarter.The forward sales componentamounts to 0.95 mn oz (30tonnes) of scheduled deliver-ies, with a smaller contribu-tion from both basic and andexotic options.

G Thiagarajan, Director,Commtrendz, said, “Throughhedging, gold producers cov-er their margins with a nega-tively bullish view on prices.Based on the US manufactur-ing data, released on Friday,gold prices are likely toremain neutral to mildly pos-itive in the near future.”

Standard gold closed onSaturday at Zaveri Bazar hereat ~30,825 per 10g, a declineof ~170.

SANJAY JOG

Mumbai, 4 September

Maharashtra government'snew housing policy, releasedon Friday in the run-up to theelection to the 227-memberBrihanMumbai MunicipalCorporation (BMC) slated forearly 2017, has evoked mixreactions from realty firms.

Niranjan Hiranandani,managing director ofHiranandani Group, said:“Buildings in suburbs havebecome old and dilapidatedand their redevelopment willbe possible with extra floorspace index (FSI) on the linesof island city ofMumbai. Further,15,000 buildings ofMaharashtraHousing and AreaDevelopmentAuthority will alsobe redeveloped.The rehabilitation of slumsaround Mumbai airport willbe now made in situ withinthree km and this will paveway for the construction ofhigh rise buildings.” He saidthe development of salt panland spread over 2,000 acrewas missing in the new policy.

According to Gulam Zia,executive director (advisory,retail and hospitality) ofKnight Frank (India), addi-tional FSI to incentivise rede-velopment of old dilapidatedis a welcome move. “However,the major issue of creatingaffordable housing stock byunlocking salt pan landremains in abeyance. So, the

vision of ‘housing for all’ hasto wait for now.”

Rajesh Krishnan, manag-ing director and CEO of BrickEagle Capital Advisory, saidthere was no clarity on avail-ability of salt pan land for con-struction. According to him,if this land is reclaimed, therewill be plenty of land to startaffordable mass housing proj-ects. “However, the govern-ment will have to take intoconsideration the environ-ment implications.”

According to Krishnan,cluster development wouldhelp ease pressure on theisland city’s infrastructure as

in future, the busi-ness and corporatecentres could moveto surburbs.

The rulingBharatiya JanataParty and the ShivSena say the rede-

velopment of old and dilapi-dated buildings will help cre-ate new housing stock for thecommon man. However,Opposition parties Congressand Nationalist CongressParty termed it as “old winein new bottle”.

Maharashtra ChiefMinister Devendra Fadnavishas said it’s not meant for thebuilders’ lobby but for thecommon man. Shiv SenaPresident Uddhav Thackerayshared chief minister's viewssaying his party would notallow builders to indulge inchanging names of localities,as has been done in some cen-tral Mumbai areas.

Realtors seek earlydecision on releaseof salt pan land

If this land isreclaimed, therewill be plenty ofland to startaffordable masshousing projects

News about the possibility of two interest rate hikes by the USFederal Reserve in 2016 fuelled interest across risky assets,driving gold and other safe-haven assets lower

GOLD PRICES

Producersraised hedgingin June quarter