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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: Oak Tree who wrote (22188)	10/23/1998 12:33:00 PM
From: gmccon	Read Replies (1) \| Respond to of 116756

I'd appreciate an understanding of hedge pricing, too, I hope someone will jump in. A president of a Canadian junior company told me the other day that Barrick is selling futures (or whatever they're called) for $425. I don't get it either. Anyone?

To: Oak Tree who wrote (22188)	10/25/1998 2:20:00 PM
From: mark warburton	Respond to of 116756

The reason that Barrick is able to forward sell their gold production is that there are investors who believe that gold will be higher in price when the future date rolls around. Also you have to realize that when we compare the spot price of gold to the future price of gold, the future price of gold has the cost of carry built into it. So lets say that gold has a cost of carry of $5.00 per month, and that the current spot price of gold is $300.00, what do you think the forward price of gold would be in 12 months time? Yes $360.00, so you see the person taking the long position in the future contract is betting that the price will rise in the near term so that his long position will be profitable, remember also that the investor can close out his position at any time and also that he can roll out the futures contract to get more time so that the price move he expects may occur. Yopu should probably grab a book on options and futures to explain cost-of-carry and the whole concept of futures trading. Mark