Barrick Gold (ABX) Message Board

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Gold/Mining/Energy : Barrick Gold (ABX)

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To: tyc:> who wrote (2801)	5/17/2002 10:46:57 AM
From: nickel61	Read Replies (1) of 3558

Basic to understanding Barrick's hedges or anyone's for that matter is to understand that the "hedge" is created by a short sale. They borrow gold and sell it into the spot market and with the proceeds from that sale they then invest in the bond portfolio. It is the computer modeling of the future interest rates they will recieve on this money that creates the "higher" price, or contango. This is their projection as to how much the short sale proceeds will earn in interest till the contract is closed by Barrick returning the gold from their future production and repaying the loan(to the bullion bank/central bank. Without the short sale they would have no proceeds to invest. Do you agree with me up to this point?

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