SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Gold/Mining/Energy : Gold Price Monitor
GDXJ 93.98+0.6%Nov 21 4:00 PM EST
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: Enigma who wrote (38253)8/3/1999 4:45:00 PM
From: Exsrch  Read Replies (1) of 116764
 
D,

Thanks for your note about this discussion. I am unfortunately at flight school in Florida (Flight Safety, where JFK Jr. learned how to fly) for the next several months so it will be difficult for me to be active on SI; however, I wanted to respond to this hedging discussion.

Let me take a simpleton approach to hedging and the varied types of activities you can engage in:

1. You can sell gold contractually (gold you don't own) today at spot in hopes of buying it contractually tomorrow at a lower price and pocketing the difference.

2. You can buy gold contractually (gold you don't own) today at spot in hopes of selling it contractually tomorrow at a higher price and pocketing the difference.

3. You can borrow/lease gold from CBs (at a nominal interest) and physically (not contractually) sell the gold immediately at spot. Invest the proceeds (from selling gold at spot) and earn interest (cantango) till the borrowed/lease term is up and you return gold to CBs from new production.

In the case of ABX, they engage in #3 and in essence they are earning an interest on the gold they have not yet produced. What gold they borrow/lease is sold and the cash from proceeds earn an interest (cantango) while the reserves act as collateral for the gold they will eventually return to the CBs.

This is no different than how Walmart makes money. Walmart buys goods (borrows 60-90 net) from suppliers and sells (sometimes below the cost of production) the goods immediately (the speed of inventory turns are higher than AP) the cash generated is invested for X number of days (X days=number of days difference from the sale to when they pay suppliers) and they earn Cantango (which is not insignificant).

Did Walmart destroy retailing in America? Yes maybe or No? Whatever the answer might be the end result is the consolidation of billions of dollars of retail sales going through Walmart which means they earn even more Cantango. Which I believe will be the most likely outcome with ABX also.

Cheers,

Exsrch
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2025 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News