Essential Definitions "Short selling: The sale of a security [stock, bond, or commodity] that is not owned by the seller, or that the seller has borrowed. Short selling is motivated by the belief that a security's price will decline, enabling it to be bought back at a lower price to make a profit."

Naked Shorting: "The illegal practice of short selling shares that have not been affirmatively determined to exist. Ordinarily, traders must borrow a stock, or determine that it can be borrowed, before they sell it short. But due to various loopholes in the rules and discrepancies between paper and electronic trading systems, naked shorting continues to happen. . . Naked shorting is illegal because it allows manipulators a chance to force stock prices down without regard for normal stock supply/demand patterns. . .

Investopedia Exchange Traded Funds: Institutional investors who have bullion in their portfolio do not want the expense associated with storing it securely. Instead, they buy into Exchange Traded Funds (ETFs) and hold their bullion in the form of a paper claim. In most instances, only those investors who own at least 100,000 shares of ETFs can request payment in bullion.

Price Determination: "The price of bullion is not set in the physical market where individuals take delivery of bullion purchases. It is set in the paper futures market where short selling can drive down the price even if the demand for physical possession is rising. The paper gold market is also the market in which people speculate and leverage their positions, place stop-loss orders, and are subject to margin calls." ¹