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Gold/Mining/Energy : Gold and Silver Mining Stocks
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To: russwinter who wrote (2279)9/21/2001 1:32:31 PM
From: goldsheet  Read Replies (1) of 4051
 
Forward sales are already accounted for on the firm's balance sheet (micro) and in the supply figures (macro).

If someone produces an ounce of gold today, it will show up as primary mine production in 2001 regardless of when or how they sold it. If they sell it for cash, there will be will be a transaction on the firm's balance sheet (both on the assets side: debit inventory, credit cash), and a net one ounce increase in total world supply. If they deliver it to a forward sale, there will still be a balance sheet transaction (one on asset side: debit inventory and one on liability side: debit forward sales), but the net effect on would worldwide supply would be zero. (production +1, forward sale -1)

It is like owning a piece of property, which is your asset, regardless of how you paid for - cash or credit. You decide how to finance the purchase based on interest rates. Likewise, when a miner pulls a ounce out of the ground, he can either increase assets (take cash) or reduce liabilties (close a forward) based on prevailing market conditions. There is always a transaction.

Hedging, which last year was -10mt probably counts less now than it has for the last 5-6 years. A peak has been reached and is currently being managed and is probably now the smallest factor in the supply/demand equation.
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