Problem 1 (6 Marks)

Goldman Mining is expecting to have 1,000 ounces of gold available for sale at the end of six months.Central Refineries Inc. anticipates that it will need to purchase approximately the same amount of gold in six months.Both parties would like to hedge their positions with regard to the price of gold.The following information is available for gold prices:

Spot price:$1,550 per oz.

6-month futures price:$1,586 per oz. (100 oz. per contract)

Required:

1. Describe how each company could hedge their position using gold futures.(2 Marks)
2. Assume that six months from now the spot price for gold is $1,592.Determine the profit or loss from hedging for each company.(4 Marks)

Could you help me solve this problem and show all steps?