[Windcatcher]

Can someone explain this to the layman? To me a short position means an expectation of a falling price. Is the article saying that they expect the price to fall, or that they erroneously expected it to fall and are now stuck?

[John123]

Is the article saying that they expect the price to fall, or that they erroneously expected it to fall and are now stuck?

Bullion banks expect to make a profit... the massive short position allows them to control the markets... unless of course they get overwhelmed with buyers...

So the answer to your question is this... who knows what will happen? It is going to be very interesting for the next few weeks...

[UnbelievingScumOnTheOtherSide]

Can someone explain this to the layman? To me a short position means an expectation of a falling price. Is the article saying that they expect the price to fall, or that they erroneously expected it to fall and are now stuck?

A short position means they put up money security (a margin) in order to borrow gold and sell it now with a contract to pay it back at a date in the future when it might cost less and you can pocket the difference. If the price goes up however (against the short), the margin covers the increased cost of repaying the gold. If it goes up too much, the margin becomes too thin and the borrower is required to either put up more margin money (a margin call) or reverse the contract (pay back the loan) immediately.

You, as an individual investor, could have other financial and personal assets seized to pay back the loan, even over and above the margin if that was wiped out entirely. Countries just declare "force majeur" (inability to fulfill the physical contract, usually temporary but not always) and the lender is stuck.

[UnbelievingScumOnTheOtherSide]

I should say, the lender is stuck only for losses above the margin when buying back the gold (which is usually in or owed to individual investor accounts when the lender is a brokerage) since the lender is holding the margin and principal.