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Gold/Mining/Energy : Barrick Gold (ABX) -- Ignore unavailable to you. Want to Upgrade?

To: Enigma who wrote (1697)	12/31/1999 4:13:00 AM
From: tyc:>	Respond to of 3558

It is possible that there is a difference between a "futures contract" and a "forward sale". When you sell a futures contract someone buys it; that is why you get paid right away ! There is certainly an obligation to deliver bullion if called upon to do so, but that is not how a futures contract is normally settled. Normally one simply buys back the contract to close it. A forward sale however is something different. To my mind a "forward sale" implies a "forward purchase"; The purchaser is contracting to purchase bullion from you in the future. It is my contention that no-one (except a wild speculator) would do this without hedging his position by shortng into the spot market. However, if you could explain how a banker could safely undertake to buy bullion in the future at a higher "forward sale" price, I would gladly reconsider my position. (Incidentally I regret my use of the word "naive"; I too am groping for reality here).

To: Enigma who wrote (1697)	12/31/1999 4:49:00 AM
From: tyc:>	Read Replies (1) \| Respond to of 3558

A Postscript. Perhaps the reason why Barrick does not mention shorting leased gold into the spot market is because it is not THEY who do the shorting, but the OTHER PARTY to the contract, i.e. the banker-purchaser. The producer doesn't actually receive the proceeds of the short sale; he gets a contract from the banker undertaking to buy gold at some date in the future at a price that is simply the proceeds of the original spot sale, plus accrued interest LESS the gold lease rate.