Short Position

A short position occurs when a precious metal dealer sells a commodity - such as gold or silver - that they have not yet purchased. The dealer is essentially betting that the market price will fall before they are obligated to deliver the asset, allowing them to buy it later at a lower cost. This strategy is often used in professional trading environments and carries both risk and opportunity.

To reduce exposure to price fluctuations, traders holding a short position often implement hedging strategies, such as buying offsetting contracts or options. The opposite of a short position is a long position, where an investor holds a commodity in expectation of rising prices. In the precious metals sector, short positions can also be a tool for inventory management, especially when delivery dates are fixed in advance and price volatility is expected.