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| Symbol | Sector | Return | Exposure | Trades | Last Trade | Status | ||
|---|---|---|---|---|---|---|---|---|
| ABX | Gold Mining | 6.50% |
|
3 | 19-Feb-10 | Currently Holding |
22-Dec-09
Short on Barrick Gold Corporation (ABX)
Holding Rationale for ABX.
Following my recent trend of shorting gold related investments, today I opened a short position on ABX. Why? Up until recently, the company sold a lot of their gold as contracts in the futures market. This insured them a reasonably stable cash flow, though it also became a drag on their earnings, being that they were selling gold for well below market due to obligations caused by their futures contracts.
A couple of weeks ago, they bought out their outstanding contracts in order so that they could sell their gold at market prices. That move alone will stand to have costed them money, though only as a one time charge. But going forward, to me, it seems that the fervor over gold is dying down, and if prices continue to decline, ABX could find itself in the eventual position of kicking themselves over their decision to de-hedge.
The position isn't terribly large (it's about 60% of the size of the recent short position I had in GLD), and I'm prepared for it to bob up and down for some time, but again, as our financial system heals and our economy recovers, I'm believing people will again be searching for assets that actual provide returns and grow, rather than one that is supposed to match inflation (a goal it has far outran, which, to me, is another sign that it is due to fall further).
Posted at 22:47 in Holding Rationales | Permalink | Top
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