Barrick Gold (ABX) Message Board

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Gold/Mining/Energy : Barrick Gold (ABX)

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To: Dundee Maples who wrote (3232)	1/3/2003 2:33:00 PM
From: tyc:>	of 3558

You would think this "expert" would try to dispel doubts by answering questions, rather than asking them. Unless, of course, he has an agenda. "If you are Bank X holding the obligation to buy the one million ounces at $320 per ounce, then you need to hedge this position in the market. Standard gold futures contracts have no deferral clauses, so you sell forward the gold that you don’t have, which means, you are now relying on Barrick to deliver the gold so you can fulfill your end of the bargain". (The emphasis is mine-tyke) I don't understand this. Do you ? The bank is already short gold. It sold it when the contract was originally drawn.... and invested the proceeds in bonds.. treasuries. Now come again.. .Why does it need to hedge this position in the market by selling more ? That's some hedge !!! And what do the terms of "standard gold futures contracts" have to do with it? It seems to me that the bank can just stay short and roll over the bonds to a longer maturity to provide further contango for Barrick, until Barrick is ready to deliver gold. But then I'm no expert.

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