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Gold/Mining/Energy : Barrick Gold (ABX)
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To: Tommaso who wrote (2491)5/4/2002 12:42:44 PM
From: nickel61   of 3558
 
Your point is right on "To hedge as you have described is to bet on the stability of the currency in which the hedge is denominated." the other major risk that you do not comment on is that the US dollar can also collapse like the South African Rand(from 5 Rand to the US dollar to 11 Rand to the US dollar today in only four years)or the Cananian Looney, the austrailian dollar etc. and as that happens and it is happening right now dramatically the value of those old sales(hedged sales with proceeds put into US dollar denominated bonds) all go down in value as the dollar declines in value against the gold currency. This is where the leverage lies. For a US based investor he sees it as a soaring in the US dollar gold price but for Barrick they are watching their past sales that had the proceeds put into US bonds,some rumored to be less creditworthy then you would hope by the way)reduced in value as the US dollar depreciates.
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