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Gold/Mining/Energy : Gold Price Monitor

GDXJ 105.33

+5.2%

Nov 26 4:00 PM EST

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To: John Hunt who wrote (33750)	5/12/1999 6:11:00 PM
From: Enigma	Read Replies (1) of 116768

<< They don't profit at all from more falling gold prices >> They don't, they get the same price whether gold rises or falls. Let' sat the spot price is $265. They sell 1 ounce of gold on the spot market for $265. At the same time they buy back the forward contract for $265 making a profit of $135. Therefore proceeds from the sale of 1 ounce are $135 + $265 = $400. If the spot price goes to $500 they buy back the contract for a loss of $100, but they sell the gold on the spot market for $500. So they still get $400. i.e. $500 - less $100 loss. This simplifies things assuming that the contracts are bought back on expiry. Actually Barrick has an options programme in place which enables it to participate if gold goes above the hedged price. dd

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