DEFINITION of 'Legacy Hedge'

A hedge position that a company holds for an extended period of time. Commodity companies, such as gold and oil producers, will often have legacy hedges on their reserves. This gives them a more stable stream of revenue as the hedge provides price guarantees.

BREAKING DOWN 'Legacy Hedge'

Depending on the movement of market prices over time, a legacy hedge can become extremely valuable or negative for the company. For example, suppose that a gold producer hedged five million ounces of gold over a 10-year period beginning in 1998 at $200. If the price of gold falls over the 10-year period, the hedge will benefit the gold producer because it is selling its gold above the market price. However, if the price of gold rises to $500, the gold producer will be selling at a significantly lower rate than the market price and will not benefit from the higher prices.

RELATED TERMS
  1. Short Gold ETF

    An exchange traded fund that seeks to profit from negative changes ...
  2. Selling Hedge

    A hedging strategy with which the sale of futures contracts are ...
  3. Long The Basis

    An individual or company that owns or has purchased a commodity ...
  4. Reverse Gold ETF

    Exchange traded funds that are designed to trade in a direction ...
  5. Gold Bull

    A slang term for a market or investor who is bullish on gold. ...
  6. Gold Bug

    An individual who is bullish on gold. Gold bugs believe that ...
Related Articles
  1. Investing

    Money Managers Long Gold at Record Amounts

    Hedge funds accumulated record high long positions in gold just two days before the Brexit vote.
  2. Investing

    Why is Gold a Counter Cyclical Asset?

    Gold is widely considered a safe haven during market turbulence. History has proven gold performs counter cyclically to the state of the U.S. economy.
  3. Financial Advisor

    4 Ways You Can Invest In Gold Without Holding It

    Owning gold can be a store of value and a hedge against unexpected inflation. Holding physical gold, however, can be cumbersome and costly. Fortunately, there are several ways to own gold without ...
  4. Investing

    Does It Still Pay To Invest In Gold?

    This asset's appeal dates back thousands of years. Find out whether it can live up to the hype.
  5. Investing

    The Midas Touch For Gold Investors

    Find some golden opportunities by investing in gold commodities or futures contracts.
  6. Investing

    How Much Disaster Can Gold Hedge?

    Gold holds up well in the face of fear, but offers little in times of true collapse.
  7. Investing

    Why Gold Matters

    Gold is a very useful investment during periods of instability and high inflation.
  8. Trading

    A Beginner's Guide To Hedging

    Learn how investors use strategies to reduce the impact of negative events on investments.
  9. Investing

    8 Reasons To Own Gold

    This precious metal's rich history stems from its ability to maintain value over the long term.
  10. Investing

    Why Gold's Price is More than 'Supply and Demand'

    The price of gold is moved by a combination of factors. But the way they work together is sometimes counterintuitive.
RELATED FAQS
  1. What is a cross hedge?

    Cross hedging is when you hedge a position by investing in two positively correlated securities or securities that have similar ... Read Answer >>
  2. What happens if you don't hedge your investments?

    Learn the purpose, advantages and disadvantages of hedging, and find out how to utilize hedging to enhance an overall investment ... Read Answer >>
  3. What are the primary factors that drive prices in the gold industry?

    Find out about the factors that drive gold prices, such as interest rates, the stock market, demand and supply, and the value ... Read Answer >>
  4. How do hedge funds use short selling?

    Learn how hedge funds use short selling to profit from stocks that are falling in price. Explore different analytical techniques ... Read Answer >>
  5. How can I track gold prices?

    Learn how to track gold prices. Gold is a commodity traded as a physical asset and a futures contract. The one you track ... Read Answer >>
  6. Has gold been a good investment over the long term?

    Examine the performance of gold as an investment, dating back to 1933, when President Roosevelt required all gold bullion, ... Read Answer >>
Hot Definitions
  1. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  2. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  3. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  4. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  5. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  6. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
Trading Center