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Sunday, March 14, 2010

Eldorado Gold (NYSE: EGO) Chinese Currency Exposure

Any time and company enters a foreign market, they gain exposure to flucuating value in the nation's currency, and that's the case with Eldorado Gold (NYSE:EGO) when they entered the Chinese market in 2009 via the acquisition of Sino Gold Mining in China.

While a small change in the value of the reminbi wouldn't have a significant effect on Eldorado Gold, a major move definitely would.

But taking that into account, the Chinese have never succumed to pressure to float their currency, and while thinking about it for the long term, over the next several years it's highly unlikely to happen.

Even so, investors in any company with China exposure need to know the effects of a change in monetary policy of the Chinese, especially if it's allowed to move upward in strength.

In the short term there's nothing to be concerned about with Eldorado Gold and other gold mining companies, but it does need to be taken into consideration for those planning on holding the company for some time.

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