Gold Price Surges in Bet on New Rally

Is gold setting up for another rally?

Near-term gold futures Wednesday had their biggest gain in six months, in part on expectations that major mining companies will accelerate the close-out of price hedges they previously put in place.

In New York, August gold futures jumped $8.80 to $314.30 an ounce. It was the biggest one-day gain since Feb. 5.

Gold reached a 2 1/2-year high of $327.80 on June 4, up from $279 on Jan. 1, as the metal attracted investors disheartened by the stock market’s troubles. But since the June peak, the price has pulled back, reaching a recent low of $302.40 on July 29.

Gold bulls say mining firms are stepping up repurchases of hedging contracts.

Mining companies often try to protect themselves against falling prices by selling gold borrowed from banks, expecting to repay the loans with less-valuable supplies later. They also can hedge by entering into sales agreements for gold that has yet to be mined.

Denver-based Newmont Mining, the world’s largest gold producer, said Wednesday that it reduced the amount of gold it had sold at preset prices by 724,000 ounces in the second quarter.

Newmont will cut the size of its so-called hedge book, which was 6.6 million ounces on June 30, by an additional 1 million ounces in the second half of this year and by 1.8 million ounces next year, Chief Financial Officer Bruce Hansen told analysts.

“These producers think gold is going to $350 or $375,” said George Dlugosh, vice president of precious-metals trading at RBC Capital Markets in Toronto.

Newmont shares rose 65 cents to $25.60 on Wednesday. Other miners also gained. Goldcorp rose 35 cents to $9.05, Placer Dome added 21 cents to $8.60, and Ashanti Gold jumped 43 cents to $5.13. But most of the stocks remain far below their spring peaks.