What is gold short selling, what are the benefits and risks?

(Dan Tri) - Short selling gold is an investment strategy that helps investors make a profit when the price of precious metals falls, but comes with high risks and is not for all investors.

What is gold short selling?

Short selling gold is an investment strategy where the trader expects the price of gold to fall in the future.

Specifically, instead of buying gold and selling it when the price increases in the traditional way, short selling works on the principle of selling first and buying later, allowing investors to profit from the price difference when the price decreases.

When shorting gold, an investor borrows gold from an intermediary, usually an exchange, brokerage firm, or investment bank. The investor then sells that gold on the market at the current price, earning a corresponding amount of money.

The investor will monitor the market developments and wait for the gold price to adjust to the desired level. When the price drops to the expected level, the investor will buy back the same amount of gold sold at a lower price than the original price. Finally, the investor will return the borrowed gold to the lender and the price difference is the profit earned.

For example, an investor predicts that the price of gold will fall in the near future and borrows 1 ounce of gold at $3,000. After a while, when the price of gold actually falls to $2,900, the investor buys the gold at $2,900/ounce and repays the lender. The profit is the difference of $100 (excluding transaction fees).

Short selling works on the principle of sell first and buy later, allowing investors to profit from the price difference when the price goes down (Photo: Trading view).

High Return but High Risk Strategy

However, short selling gold also carries many potential risks. If the price of gold increases instead of decreasing as predicted, investors will suffer losses. In particular, in the case of continuous sharp increases in the price of gold, the loss can be very large, even unlimited.

In addition, to conduct short selling transactions, investors are required to have a margin account with a certain deposit. This amount acts as a guarantee for transactions.

When losses exceed the allowed threshold, investors may be subject to a margin call, which means they must add more money to their account or close their positions to limit their risk. This may force investors to accept losses at an undesirable time.

Therefore, experts believe that short selling is not for inexperienced individuals, especially in a volatile market. Investors need to understand the market and trading principles to decide on the right investment direction for themselves.

Source: https://dantri.com.vn/kinh-doanh/ban-khong-vang-la-gi-loi-ich-va-rui-ro-ra-sao-20250531161636687.htm