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Politics : Dutch Central Bank Sale Announcement Imminent?
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To: sea_urchin who wrote (7626)9/4/1999 8:03:00 AM
From: Enigma  Read Replies (1) of 81272
 
When the producer/hedger sells it is one sale in the forward market - not the spot. At that point there is a lease agreement with a bank. At some point before the delivery date the forward sale is covered by the producer who buys forward gold of the same maturity. So we have in effect a cancellation of the first forward sale. I don't know what the hedger does - presumably he also buys the forward contract, or rolls it over.

If the producer doesn't have the gold to repay the loan (and people have pointed out here that the main producers are well covered by reserves)he would have to repay the bank at MV. The bank would then have to report this as a sale or buy back gold in the market to replenish its reserves. So, since the first forward sale has been cancelled the gold has only been sold once?
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