Compare the local-currency return of gold with an unhedged position and a simplified fully hedged position. Separate gold performance from exchange-rate movement and account for hedge cost or slippage.
The unhedged local-currency return combines gold-price movement and FX movement. A simplified fully hedged result removes the FX effect, then subtracts the hedge cost and any hedge imperfection you enter.
A currency hedge is intended to reduce the impact of exchange-rate movement on an investment whose underlying exposure is priced in another currency. This calculator isolates that concept rather than assuming the hedge is free or perfect.
If the local currency weakens against the US dollar, an unhedged USD-gold position can gain an additional local-currency benefit from FX. Hedging can remove that effect as well as the downside from an adverse currency move.
No. The hedge addresses currency exposure in this model, not gold-price risk.
A favorable currency move can add to the local-currency return when the underlying gold exposure is USD-denominated.
It represents the modeled cost of an imperfect hedge relative to a theoretical full offset.