There was an important question in the comment area from Tim_P about how Barrick might have lost so much money in their gold hedging, or if they even did.
First the question, then my answer.
Chris, Let me add my thanks to you for all the effort to keep us informed. This site has been the main thing that is keeping my family from being blindsided by the coming storm. Thanks to your efforts, we are steadily preparing and have even bought gold, which is about as unusual for my family as can be imagined.
If I understand it correctly, this is a pretty significant event. My understanding of the situation is this:
Let’s say I find gold in the stream in my back yard and I can reliably produce 10 oz a month. Normally, I cannot predict the price of gold reliably, but I can predict the cost of producing that gold from my stream. If I can produce gold for $200 an ounce, and the current price is $500 an ounce, I can make a slow profit. Or, I could sell my future gold production for a period of 24 months up front for $500 an ounce to someone that thinks gold will go up and then I can profit now. During the 100 months, I may get a bit uncomfortable when the price rises above $500, but I’m Ok, since it still costs only $200 an ounce to produce.
by lemonyellowschwin