More important, it provided a fundamental basis for stating categorically that the low point in gold for the next decade is in place. The downside price risk is no longer open-ended. It is only a matter of time before additional upside materializes. The next strong upside move will be driven by another fundamental development, which will also come as a surprise to this excessively short market. That development will be widespread gold producer hedge book buybacks combined with high profile statements that promise to de-emphasize the importance of hedging.
Buybacks are already underway.
However, anti-hedging statements, which will probably come later this year, will alter negative market psychology by removing still another argument in favor of the bearish case for gold, the expectation of ceaseless and expanding producer hedging. However, GFMS is understating the magnitude of the change. Gold company reserve growth dropped significantly in 1999. The raw material for hedging is not expanding. Reserve growth in 1999 will be minimal.