Topic Covers | Swap Opperations, Financial Swap, Buying, Selling
Swap operations
This term is frequently used in economic literature. When it comes to the gold market, it can be interpreted as buying or selling a metal followed by an immediate opposite operation. Such transactions’ volume is larger than that of spot transactions because gold swap does not have such influence on the precious metals market as “spot” operations. A standard operation includes 32 thousands troy ounces (1 ton).
There are three types of spot operations with gold:
Swap by time (financial swap)
It is a classic type of a swap operation. It corresponds to a combination of cash and fixed-date transactions: buying (selling) of one and the same metal amount on conditions of “swap” and selling (buying) on conditions of “forward”. The date of closer operation’s execution is called the date of valuation, and a further date of operation’s execution is known as the date of swap ending. An agreement can be concluded for any period of time: from 1 day to several months. Usual terms of a swap agreement is considered to be 1, 3, 6 months and 1 year. The essence of such operations consists in the possibility of converting gold into a currency with keeping the right to buy back gold after swap expiration. Before the contract expires, the parties can agree to extend the contract or eliminate the swap making opposite calculations. Swap operations have become popular. First of all, benefit from attraction of financial resources is obvious in comparison with USD deposits’ attraction, because rates of swaps' interest are lower. Moreover, the possibility of smooth gold attraction which can be used for remains of metal accounts managed by banks, for example. Finally, these operations are very popular among central banks. If they want to convert their own gold reserves, they can be sure that their activity will not seriously influence the gold market; instead of being sold directly on the market, gold moves between contractors.
Swap by metal quality
Sometimes, under certain conditions, a market participant needs gold of higher pureness than he actually has. This wish can be met using swap by metal quality. Such swap provides buying (selling) of one quality metal and against selling (buying) gold of another quality at the same time. The party that is selling metal of higher quality receives a reward depending on deal’s volume and risk related to substitution of one type of gold for another.
Swap by place
Such swap provides buying (selling) gold at one place against selling (buying) it at another place. One of the parties receives reward because gold price varies depending on location can be more expensive at one place.
Swap operations
This term is frequently used in economic literature. When it comes to the gold market, it can be interpreted as buying or selling a metal followed by an immediate opposite operation. Such transactions’ volume is larger than that of spot transactions because gold swap does not have such influence on the precious metals market as “spot” operations. A standard operation includes 32 thousands troy ounces (1 ton).
There are three types of spot operations with gold:
Swap by time (financial swap)
It is a classic type of a swap operation. It corresponds to a combination of cash and fixed-date transactions: buying (selling) of one and the same metal amount on conditions of “swap” and selling (buying) on conditions of “forward”. The date of closer operation’s execution is called the date of valuation, and a further date of operation’s execution is known as the date of swap ending. An agreement can be concluded for any period of time: from 1 day to several months. Usual terms of a swap agreement is considered to be 1, 3, 6 months and 1 year. The essence of such operations consists in the possibility of converting gold into a currency with keeping the right to buy back gold after swap expiration. Before the contract expires, the parties can agree to extend the contract or eliminate the swap making opposite calculations. Swap operations have become popular. First of all, benefit from attraction of financial resources is obvious in comparison with USD deposits’ attraction, because rates of swaps' interest are lower. Moreover, the possibility of smooth gold attraction which can be used for remains of metal accounts managed by banks, for example. Finally, these operations are very popular among central banks. If they want to convert their own gold reserves, they can be sure that their activity will not seriously influence the gold market; instead of being sold directly on the market, gold moves between contractors.
Swap by metal quality
Sometimes, under certain conditions, a market participant needs gold of higher pureness than he actually has. This wish can be met using swap by metal quality. Such swap provides buying (selling) of one quality metal and against selling (buying) gold of another quality at the same time. The party that is selling metal of higher quality receives a reward depending on deal’s volume and risk related to substitution of one type of gold for another.
Swap by place
Such swap provides buying (selling) gold at one place against selling (buying) it at another place. One of the parties receives reward because gold price varies depending on location can be more expensive at one place.
No comments:
Post a Comment