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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum

GLD 374.22

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Nov 21 4:00 PM EST

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To: Seeker of Truth who wrote (3590)	1/18/2006 5:14:39 PM
From: Taikun	Read Replies (1) of 217948

There are two variables to a nation importing oil: spot rate and currency exchange rate If you're a nation and you import oil in USD you can't 'hedge' your exchange rate more than about 18mos out. Nations have to manage their energy supply and therefore they can't hold Euros when they need USD to buy oil. They have to hold some USD from, otherwise a crash in Euro means their economy grinds to a halt (particularly if it were to occur with a spike in oil prices). So, it's not about the spot rate for oil, its about reducing one variable (the USD exchange rate) and maybe buying futures they can mitigate the oil spot rate volatility (hence the advent of SPRs which works on the 2nd variable) Also, if a country simultaneously sells products in USD, holding some USD reserve shields them from exchange rate shocks that their exporters perhaps haven't hedged.

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