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Why does Zijin Mining buy and sell gold futures?
Zijin Mining is a supplier of gold mining and processing, and its main business is gold. Therefore, the gold it produces will be affected by the fluctuation of gold price in the future sale, which will bring the risk of profit uncertainty. Therefore, it needs to hedge the influence of spot price fluctuation of gold in the futures market through futures contracts, so as to avoid spot price fluctuation and lock in its profits.

The ideal hedging effect is that futures and spot are completely hedged, so that profits are not affected by spot price fluctuations. However, in practice, the spread between the spot price and the futures price will fluctuate, so the basis risk will be encountered in the hedging process, resulting in that sometimes the losses caused by the drop in spot price cannot be completely hedged, and sometimes there is still a certain profit after the losses caused by the drop in spot price are completely hedged. Therefore, hedging needs to constantly adjust future positions in actual operation to make the hedging effect as close as possible to the ideal level.