Review the information on gold futures contracts

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Reference no: EM131482839

HBS case: Betting on gold using futures-based GOLD ETF

Questions:

1. Review the information on gold futures contracts of the CME Group-based on contract specifications available in case exhibit 4. How do gold futures work?

2. Suppose Michelson took a long position (as a speculator) on the December 2012 gold futures contract on 9/20/2012 and that it closed it on 10/19/2012. Compute the daily gains using the daily futures prices over that month as given in case Exhibit 7. Would Michelson have lost money or made a profit during that period and would he have received a margin call?

3. Case Exhibit 6 shows the prevailing futures prices (settle) for gold on 10/19/2012. Assume that the Oct-12 futures settle price of $1,722.8 is effectively the gold spot price. What total carry cost do you need to assume for the arbitrage-free futures prices to match the observed quoted Dec-12 futures prices? What would it need to be for the Feb-13 futures price?

4. Case Exhibit 6 shows that gold futures prices (settle) are higher for longer maturities: does that mean that gold prices were expected to rise?

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The assignment involved calculation on determining trading on future gold, one question involved calculating the loss or gain , another cost of carry and lastly on where long term investment in gold is worth while.

Reference no: EM131482839

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inf1482839

5/22/2017 6:24:55 AM

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len1482839

5/3/2017 6:52:23 AM

Please, I need this done by 7th because this is a presentation that I need to prepare and is gonna be due in 10th, and I need time to get power-point and everything done before I can present it.

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