Shorting gold, or how to profit from the fall of the precious metal
It is generally accepted that there is only one way to make money on gold: by buying the precious metal and holding it until the price rises.
But gold doesn't always rise in price: there have been moments in history when this asset has fallen in price quite rapidly, losing tens of percent of its value.
That's why there's a category of traders in the market called short sellers. Their strategy involves selling during a downtrend, and they earn just as much as those who go long.
But how does one technically short gold, since it involves selling an asset that you don’t have?
Many beginners don't understand the concept of short trading, although it's actually quite simple. The process is best understood with a simple example:
Imagine you work for a grocery company. A customer approaches you with a request to sell them potatoes at the current price of $1 per kilogram for delivery in a month. You know the harvest is in a week and the price will drop, so you enter into a contract to supply them at $1 per kilogram. After the price drops, you buy the potatoes for $0.50 and deliver them to the customer—the deal is closed at a profit.
Trading in virtually any exchange-traded asset, including shorting gold, follows a similar pattern, but here the process is more automated.
Technical features of shorting gold on the stock exchange
To get started, you should open an account with one of the brokers that allows short trades— link to short brokers. You can download a free trading platform from the broker.
The process is carried out on the trader's trading platform using contracts for difference (CFDs), which allow for both buy and sell transactions.
First, you sell an asset, such as XAUUSD, at the current exchange price, and then, once the price drops, you close your trade by buying. Learn more about gold trading.
In practice, everything is much simpler than it can be described in words: to make a transaction, you just select an asset and click the Sell button.
Gold Short Strategy on the News
For beginners, a news-based strategy is much easier to use. Gold reacts strongly to global events: economic reports, central bank decisions, political crises, and inflation data. Factors that cause gold to fall.
Main idea:
Keep an eye on the economic calendar , such as the release of the US inflation report, the Federal Reserve's interest rate decision, or geopolitical events.
Determine the market reaction - if news indicates a strengthening of the US dollar or a decrease in demand for gold, the price of the metal usually falls.
Open a short position (Sell) on XAUUSD before or immediately after the news release when the market starts to decline.
Take Profitwhen the price reaches the level that matches your calculation.
your stop loss just above the last local high to limit potential losses if the market reverses.
The advantage of a news strategy is that a beginner doesn't need to understand complex indicators or chart patterns—it's enough to understand how global events affect the price of gold.
Shorting gold allows you to be independent of rising prices and leverage the asset's volatility to generate profits, making your portfolio more balanced and opening up opportunities for profit in any market conditions.
