NEW YORK, Nov 21 (Reuters) - COMEX gold rose Friday after Barrick Gold Corp., one of the most active hedgers, said it was no longer committed to selling the metal forward to protect future production from falling prices.
The news underscored that producers were more inclined to avoid hedging than to lock in prices for reserves at the highest levels in almost eight years.
"It's pretty big news and I think it took the market a little by surprise this morning," said Bernard Hunter, a director at bullion dealer ScotiaMocatta in Toronto.
"Later on there was some confusion about whether it was confirmed or just a rumor. Maybe that contributed to taking some of the sting out," he said.
December gold ended up $2.30 at $396.00 an ounce. It rallied from a low of $393.10, just before Barrick said it was changing its policy, to $398.20.
Spot gold rose to $395.80/6.60 from $393.30/4.00 at the previous close. London's afternoon fix was at $395.50.
Along with the falling dollar, "dehedging" has been a major factor in the 2003 bull market, which saw gold trade above $400 on Wednesday for the first time since March 1996.
Barrick Chairman Peter Munk told reporters in London that the Canadian company was cash rich and would do no more hedging over the next decade. This raised eyebrows only a day after Munk extolled the virtue of hedging at a conference.
Barrick was considered perhaps the most sophisticated trader among the major mining companies, with one of the largest hedge books. Using options and forwards, it generated profits even when the spot price of gold in the late 1990s was below the cash cost of prying nuggets out of the ground.
"It should be absolutely bullish," said James Pogoda, vice president of precious metals at Mitsubishi International Corp. "I thought we would be a bit higher. Any time we've gotten close to $400 it's been capped."
Gold rose steadily with less producer selling to cap the market this year, as investors diversified out of the dollar and sought safe havens as global political tensions mounted.
Gold gained momentum as the euro rose to a life-time high this week, before both succumbed to profit-taking as the dollar bounced back a bit.
The euro was last quoted slightly firmer on the day at $1.1917/21, not far below the $1.1977 record high.
Most dealers are waiting for the euro to break above $1.20 to start buying again. But they will look for a break out of the week's $400.70-$392.00 range to set direction.
Next week could be very volatile or deathly quiet. Options expire Monday on the COMEX and in London cash markets, and positions must be rolled over before December delivery notices start on Wednesday, ahead of a four-day U.S. holiday weekend.
"The market still wants to go to $400 and you've got to think it will occur," Hunter said. "With three days next week until Thanksgiving, that's a real coin toss."
December silver rose 3.3 cents to $5.295 an ounce, trading $5.24 to $5.335. Spot silver closed at $5.27/29, up from $5.25/27. It fixed at $5.235.
At the NYMEX, January platinum fell $6.40 to $760.30 an ounce. Spot platinum fetched $760.00/765.00.
December palladium slipped 75 cents to $195.75 an ounce. Spot was at $191.00/196.00.