Finance School of management Spot-Futures Price Parity for Gold There are two ways to invest in gold buy an ounce of gold at so, store it for a year at a storage cost of sho, and sell it for S invest so in a 1-year T-bill with return rs and purchase a 1-ounce of gold forward, F, for delivery in 1-year 0-h=r F gold =1 gold(syn) F=(1+r+h)s 0 uesTc8 Finance School of Management Spot-Futures Price Parity for Gold ❖ There are two ways to invest in gold ▪ buy an ounce of gold at S0 , store it for a year at a storage cost of $hS0 , and sell it for S1 ▪ invest S0 in a 1-year T-bill with return rf , and purchase a 1-ounce of gold forward, F, for delivery in 1-year ( ) 0 0 1 ( ) 0 1 0 r F 1 r h S S S F h r r S S S gold gold syn + f  = + f + − − = = = −