Question of the Week – Alternative Investments

Since gold is an input, you would
want to hedge future price increases. As the price goes up, your costs go up,
and your margins are squeezed. If the price goes down, you are fine.

To hedge against gold price
increases, you would want a position that pays off if gold price increases. The
option to sell gold will pay off as
prices go down, not up. That is
opposite to the position you want to take.