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Gold/Mining/Energy : Gold Price Monitor
GDXJ 110.89+1.8%Dec 10 4:00 PM EST

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To: Real Man who wrote (90583)10/15/2002 3:11:36 PM
From: IngotWeTrust  Read Replies (2) of 116810
 
Gold sold forward does NOT require a futures contract to be the vehicle.

That being said, the intended recepient of the gold MAY chose to use the futures market, as a commercial, via a long contract to hedge their future delivery position, selling said long position when the producer has actually delivered.

Likewise, the producer, can be and is often required to enter 1) into a forward contract (which is not a futures contract) or 2) to use futures contracts or 3) produce evidence of private OTC gold contracts in order to take down the loan facilities required to build a mine, finance acquisitions, acquire equipment, etc.

If they choose the futures contracts option, then they, the producer purchase short contracts, and close those short when they make delivery. Otherwise, those shorts are customarily rolled forward, month by month by month until they are no longer needed. And they are rolled forward basically at a net no loss no gain, as they are executed as "spread contract" orders. These spread trades can even be executed on the curb instead of in the pit.

There is one other little known fact about futures markets executable trades you may appreciate learning: while the futures themselves may be locked limit up or down, and straight longs or shorts be unable to be executed, the spread orders are ALWAYS executed, even on those "limit" days.

gold_tutor
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