A Jeweler Manufacturer Case Assignment

A Jeweler Manufacturer Case Assignment

Suppose today is May25, 2018, and your firm is a jeweler manufacturer that needs 2,300 ounces of gold in October for the fall production run. You would like to lock in your costs today, because you’re concerned that gold prices might go up between now and October. Assume that the hedge is market to market.

How could you use gold futures contracts to hedge your risk exposure? What price would you be effectively locking in? (Omit $ sign in your response.)

Suppose gold prices are $1,080 per ounce in October. What is the profit or loss on your futures position? (Input the amount as positive value. Omit $ sign in your response.)

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