Gold Warrants

These originated in 1986-87 when they were mostly related to gold mine issues. Now being widely issued by Swiss, American and Japanese banks and securities houses, a warrant gives the buyer the right to buy gold at a specific price (usually dollars) on a specified value date, normally one year or eighteen months hence. The buyer pays a premium for this opportunity. The warrants can usually be sold back at any time and in practice buyers do not normally expect to take delivery. Warrants are essentially options but some investors prefer to take this paper rather than deal with the complexities of options trading because a warrant is a securitised instrument. Warrants are associated with a gold price rally and are rarely issued into a bear market.