A Research On Hedging Strategies Of Gold Processing And Retail Enterprises

After ten years of bull market,gold price became volatile and began to fall in 2011.As the fluctuation level increased,it had great impact on profit level of gold processing and retail enterprises.In order to maintain stable operation and reduce volatility,enterprises adopted hedging method to establish the hedging mechanism between future market and spot market.Because gold processing and retail enterprises need to fix the buying prices of raw materials and the selling prices of finished products,enterprises should adopt comprehensive hedging strategies.In view of the above risk points,enterprises should establish a reasonable organizational structure,should design specialized process management and internal control systems,and should create a perfect information system as a supplement,to avoid regulatory deficiencies and to avoid the happening of taking the name of hedging to do speculation.This article introduces three main methods,they are gold leasing together with buying hedging,buying spot gold together with selling in delayed contracts and buying spot gold together with selling in future contracts.The author analyses the advantages and disadvantages of three hedging strategies,evaluates the overall hedging effect.From the final result we could see that enterprises achieve the purpose of risk transfer through hedging.At the end of this article,some suggestions on innovation and improvement of existing hedging strategies and methods are put forward.Innovations include two aspects: firstly,a new way of buying spot gold together with selling in AU(T + N)contracts has been added.Secondly,using dynamic hedging mode to replace static hedging.Suggestions for improvement include two aspects also: firstly,suggestions for trade improvement.Taking the advantage of the optimization of basis spread,on the premise of strictly abiding by the principle of hedging,enterprises could establish a position in arbitrage way,when the basis spread is in the zone of small probability,because of the intrinsic regression mechanism,enterprises may grab extra profits.Secondly,the author points out some problems in the market itself,and puts forward some personal suggestions.