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Message:: [QUOTE="GoldFinger1969, post: 2072435, member: 73489"]But what is enough inventory ?  I think a few weeks is fine....once it drops, you order more at the new price. I'm sure APMEX knows what happens to orders as the price of silver falls or rises 5%...10%....20%.  So if they know that a drop in price of 20% leads to a huge inventory loss but will not lead to a demand response (inelastic demand), then some hedging might be necessary.  But as they have steady orders and generally see more buying as the price goes lower, I would think it's not mandatory to hedge. Plus, that doesn't take into account what happens when the price RISES and they reap a windfall...unless of course, demand is not inelastic and falls off as the price rises. My point is that unless they are holding huge amounts of inventory relative to daily/weekly demand, and unless demand is elastic when price rises but inelastic when it falls, they should see windfall gains and inventory losses cancel out over time. As expected...and then your spread becomes your only/major source of income. I realize that's simplistic and there could be adjustments, but these guys are supposed to be dealers and wholesalers/retailers, not speculating on the price of the metals.  Only a very sharp drop in the price on a large inventory build that happens very very quickly and that is not accompanied by increased orders should be a financial problem.[/QUOTE]