Change of managment needed now, page-4

Unclescroodge,

Maybe you could enlighten me here.

Why do you think that not hedging the gold price was a failure on the part of management? I understand that in hindsight that this proved to be an expensive mistake, however, if they had hedged and the USD had subsequently devalued and gold rallied then BDR would have lost money.

In short, I don't blame them for not hedging, provided they were betting on USD weakness and Gold strength, I think this will ultimately be the case.

Also, my understanding of hedging is that this procedure would require either some sort of contra trade or a forward exchange contract, the latter being the reason many airlines have had difficulties.

I recall SAA (South African Airways) in the late nineties signing into a Forward exchange contract to fix the price of jet fuel, for about 5 years thereafter they ended up paying double the fuel cost of competitors (as jet fuel decreased in cost), this nearly bankrupted the company. Since then I've been very suspicious of hedging.

I'd love to hear more from you on this.

Cheers
Ivan