Hedge gold yield
Goal: your results depend on gold rates, and you want to remove that uncertainty while staying in gold.
Hedging is not a separate product. It uses the same positions as the other guides; what changes is why you take them. A hedge does not make you earn more. It makes the outcome predictable, like switching a mortgage from a variable to a fixed rate.
All examples: 1,000 PAXGy, 180D maturity, indicative testnet rate 2.55% a year (≈ 12.5 PAXG of yield over the term). Values rounded.
Case A — falling gold rates would hurt you
Section titled “Case A — falling gold rates would hurt you”Example: a fund has promised its clients a gold return and pays it from the yield of the PAXGy it holds. If gold yield drops, it cannot pay.
Hedge: sell future yield. Keep PT, sell YT today for ≈ 12.3 PAXG. Whatever happens to rates, that amount is already received.
| Actual gold yield | Without hedge you receive | With hedge you have |
|---|---|---|
| Falls to 1% | ≈ 4.9 PAXG | ≈ 12.3 PAXG (received upfront) |
| Stays at 2.55% | ≈ 12.5 PAXG | ≈ 12.3 PAXG |
| Rises to 5% | ≈ 24.4 PAXG | ≈ 12.3 PAXG |
You give up the upside if rates rise, and remove the risk that they fall.
Case B — rising gold rates would hurt you
Section titled “Case B — rising gold rates would hurt you”Example: a company has borrowed 1,000 oz of gold and pays a variable interest rate linked to gold rates. If rates rise, its cost rises.
Hedge: buy future yield. Buy YT on 1,000 PAXGy today for ≈ 12.3 PAXG. If rates rise, YT pays more and offsets the extra interest.
| Gold rate | Interest you pay | YT pays you | Your net cost |
|---|---|---|---|
| Falls to 1% | ≈ 4.9 | ≈ 4.9 (after paying 12.3) | ≈ 12.3 PAXG |
| Rises to 5% | ≈ 24.4 | ≈ 24.4 (after paying 12.3) | ≈ 12.3 PAXG |
Either way your cost stays around 12.3 PAXG: a variable cost has become a fixed one.
Summary
Section titled “Summary”| Your exposure | Risk | Hedge |
|---|---|---|
| You earn gold yield (holder, lender, treasury) | Gold rates fall | Sell future yield: keep PT, sell YT |
| You pay gold-linked rates (borrower, structured product) | Gold rates rise | Buy future yield: buy YT |
In the app
Section titled “In the app”Use Sell Future Yield for case A or Trade Future Yield for case B, with the notional and maturity that match the period you want to protect.
Things to know
Section titled “Things to know”- A hedge reduces rate risk; it does not remove the risks of the underlying asset or the protocol.
- Match the maturity to the period you want to protect.
- In case B, the hedge only works if the rate you pay moves together with PAXGy yield. The closer the link, the better the hedge.