euro, british pound gold

Discussion in 'Financial Futures' started by zdreg, Dec 3, 2009.

  1. zdreg


    gartner says that he is long gold and long british pound and Euro.

    he says he is uncomfortable with gold so he hedges it with the euro and bp.

    please explain how this hedge works and if it is useful.
  2. zdreg


  3. jj90


    Didn't work today.
  4. this makes no sense
  5. what he said is he is long gold and short the pound against it. if you both buy gold and sell the pound at the same time each time you do a transaction in the same amount it basically makes it as if you purchased gold in that currency rather than in dollars. so basically he is saying he's not sure what the US dollar is gonna do, maybe there will be some crazy flight to safety causing gold to go down again in US dollars, but that shouldn't happen to the pound, so hopefully it'd still be breaking new highs there. i mean if a pound were suddenly parity with the dollar gold could be trading sub 800$ and still be in new highs when measured in a different currency. hope that helps
  6. jj69


    He is long gold and short euro, short bp so he can hedge against the dollar rallying and gold tanking. Like today, he was probably net - on the trade for the day but not by much whereas gold got hammered. Of course his returns are lower when gold rips against usd b/c euro and bp are rallying too most likely. So he's essentially looking for gold to rally against the euro or bp or whatever other currecy he's got on, and gold has done that.
  7. zdreg


    thanks to all of you for explaining the hedge
  8. Wouldn't euro carry more cost to short, since its rate is much higher?
  9. It'd be about 1.2% pa.

    Which isn't too much compared to the potential price movement of gold vs euro.
  10. A bit more appropriate (for gold hedge) might be long /GC futures, long EUR/AUD cross. AUD's correlation to gold makes it a bit more practical as a gold hedge, but you'd be short the aussie rates, and the gold-EUR/AUD trade is toast in the near term. AUD/USD-gold looks interesting in the coming weeks. Aussie economy is (**gasp**) seeing actual growth...rate hikes to follow.
    #10     Dec 9, 2009