| Forward Contract |
A transaction in which two parties agree to the purchase and sale of gold at a future date, commonly 1 month, 3 months, 6 months or 1 year hence, but any date may be traded in the professional market.
The Mechanism of a Forward Contract (Source:
Gold 1996
Update I, Gold Fields Mineral Services Ltd)
The premium on a forward transaction in US$ will reflect current Euro-dollar interest rates less an allowance for current gold interest rates. Forward contracts are an integral part of many swap arrangements, in which a central bank, for example, sells gold spot while simultaneously entering a forward contract to buy it back. Mining companies have also made extensive use of the forward market in recent years as part of their more sophisticated hedging programs.