This activity accelerated gold supply by as much as two years future mine output. The sharp spike in the gold price following the announcement of the Washington Agreement blew up the hedge books of two high profile producers, Ashanti Goldfields and Cambior and threatened the solvency of the two companies. Their difficulties dramatized the risks of excessive hedging and soured both investor and management appetites for the practice. The rationale for investing in gold stocks is the expectation of a higher gold price. It is not because a particular CFO or hedge manager happens to be a clever trader in the gold market.
Nobody wants to pay for that.
The valuation of hedge book enhancements to earnings cannot begin to approach those delivered by the upside in the gold price. At times, it has appeared that industry management does not understand gold market fundamentals. In certain cases, there was an apparent dread of higher gold prices because of potential financial damage from their hedge books. All of this appears to be changing due to a widespread reassessment of hedging. Gold equities are exceptionally cheap at the moment.