American Barrick Resources Corporation: Managing Gold Price Risk

Through the 1980s and early 1990s, as American Barrick’s reserves and financial strength improved and the market for gold-hedging vehicles matured, the company’s risk management activities grew in size and complexity. The firm used every instrument available to manage its gold price risk.

General Motors was the world’s largest automaker and, since 1931, the world’s sales leader. In 2001, GM had unit sales of 8.5 million vehicles and a 15.1% worldwide market share. Founded in 1908, GM had manufacturing operations in more than 30 countries, and its vehicles were sold in approximately 200 countries. In 2000, it generated earnings of $4.4 billion on sales of $184.6 billion. The company is trying to accurately calculate the risk of a potential devaluation to the ARS. In doing so the company had to decide between two options on how to proceed; was it worth the costs to increase the size of GM’s hedge position beyond the standard policy or should GM Argentina rely on other approaches to cope with the expected

These two lucrative thought up a genius way to make huge profits with little risk to themselves. Their plan was to buy up a majority of the gold in circulation, cause the price of gold to go through the roof, then sell it off for massive profits. To pull it off, Gould enlisted the help of President Ulysses S. Grant's brother-in-law, Abel Corbin. Gould and Fisk met with Grant through Corbin's help numerous times. Their goal was to convince Grant to put a hold on government sale gold, because if people noticed that the price of gold was going up because of the lack of it on the market, the government could change that in an instant by flooding the market with gold, in turn ruining Gould and Fisk's plan. They effectively got their hands on control of the governments gold by convincing Grant to hire Daniel Butterfield as assistant Treasurer of the United States. Butterfield agreed to warn Gould and Fisk if the government was planning to sell gold in return for money. Finally, Gould and Fisk had all the pieces of their plan assembled. Now it was time for action. Together, Gould and Fisk started buying as much gold as they could. Combined they bought about 75% of the gold on the market. On September 20, 1869 gold prices rose 20%, causing huge ripples in the financial world. Everybody was unprepared for the sudden rise in prices and many firms

In order to corner gold, someone had to keep treasury from selling so they had to get close with the highest power.

Mr. Lee and the other executives expect to generate a higher profit from hedging since they have majority of their personal wealth invested into the firm. The focus of any hedging program should always be to minimize the firm’s risk of loss, but that does not mean the they will

First, I would like to consider the economic theory behind the gold rush and explain why on the surface; it is quite simple. Consider a modern theoretical case. Say a family of four is living in Cincinnati, Ohio and the main earner of the family works for a tool manufacturing company in Cincinnati. Suppose that the company decides during their yearly employee reviews that they aren’t going to give this certain individual a pay raise for the next year; also suppose that the employee does not see themselves climbing up the pay scale any further. Now suppose that this person is offered a thirty thousand dollar per year raise if they move out to Los Angeles, California for a new machine related job. Assuming

The current 50% hedging policy executed at the fund level has served well for OTPP for the past ten years, contributing to the fund’s positive returns. The FX Hedge Program not only has minimized the downside risk, but has also limited the upside potential. If OTPP decided not to implement a hedging program in 1996, they would have lost about $983 million CAD over the ten year period (1995-2005) which is valued at 2% of the portfolio. With the hedging program, OTPP was able to reduce the overall loss to about $469 million CAD, but also limited the gain from the depreciation of the pound.(Exhibit 1) Hedging is an excellent short-term risk minimizing strategy for long term investors, sustaining a continual payout of pensions during volatile times in OTPP’s invested currency markets. Currently, approximately 21% of OTPP’s net assets are exposed to foreign currency risk. Consequently, it is essential that OTPP maintain a risk management program of hedging, as slight currency fluctuations can significantly affect the value of the fund. Similarly to continual renewal of swaps, hedging can be a very expensive risk management strategy.

10. The current price of silver is $750. Storage costs are $8 per ounce per quarter payable in advance. The interest rate is 12% p.a. with continuous compounding. Calculate the futures price of silver for delivery in six months (to two decimal places).

BHP Billiton is the world’s top producers of major commodities. China, as BHP Billiton’s largest export market, demand strongly influences the BHP Billiton’s operation (Western Australian Iron Ore Industry Profile 2015). According to the annual report of BHP Billiton (2015), China brought about 36.6% revenue in the amount of total export revenue for BHP Billiton, among the largest product is Iron Ore, which was 66% in 2015. Meanwhile, the forecast of iron ore will continue to increase production. However, Chinese steel consumption may growth slow next few years (shows in figure 1) because the real estate industry decline (Mark 2015). Therefore, oversupply and weaker demand may create the fluctuations in commodity prices which related to commodity risk.

* Hedging. Hedging with the fuel market could save enough money in one year to offset the next year’s fuel supply and costs.

* AIFS hedged its future cost commitments up to 2 years in advance. The problem was that the hedge had to be put

American swore off hedging after merging with US Airways Group. Most of its postmerger executives hail from US Airways, which abandoned the futures markets in 2008. Deep discounter Allegiant Air stopped hedging in 2007. Canada’s low-fare WestJet Airlines Ltd. gave it up a few years ago.

But, even though the possibility of winning exists, the company is exposed to a greater risk if it does not hedge. Moreover, the policy of the company is to ensure against the risk, not to speculate on the foreign exchange market.

Describes the evolution of gold’s value from the peak of peoples’ interest in it to its recent downfall. The article begins by explaining the price of gold. It then gives three reasons for owning gold. The first one being “gold mining production to decline over the next years by 7%, which in turn will support gold prices.” It also states that even though the price for gold has decreased to 1,100 an ounce it is expected to increases do with this factor. A Wall Street Journal, article “ The Case for Gold ” by Lindsay Gellman starts off by describing how gold prices have dropped in the recent years, butt then argues that the key to gold is not to think of the now but to think of the long term. It states that even though prices are low, in the long run, they will double. Just like the Forbes article Gellman’s article argues that “gold Supply will likely Plateau or drop, pushing prices up.” Both of these articles suggest that by 2020 the price of gold will be more than $2,000 an ounce, saying it is best to start buying now. They both point to historical and contemporary moments, and reasons that buying gold will be beneficial in the long

Hedge funds are investment vehicles that explicitly pursue absolute returns on their underlying investments. Hedge Fund incorporate to any absolute return fund investing within the financial markets (stocks, bonds, commodities, currencies, derivatives, etc) and/or applying non-traditional portfolio management techniques including, but not restricted to, shorting, leveraging, arbitrage, swaps, etc. Hedge funds can invest in any number of strategies. Hedge fund managers typically invest money of their own in the fund they manage, which serves to align their interests with