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4. Hedging Against Price Volatility: To mitigate the risks associated with spot price volatility, dealers employ hedging strategies. They may hedge by engaging in futures contracts, options, or other derivatives. These financial instruments help them lock in favorable prices for their inventory, enabling them to sell at predetermined prices regardless of market fluctuations.
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Apologies for the confusion. Allow me to provide a more detailed explanation of how hedging works for precious metal dealers.Please expound on how the hedging works. If a dealer engages with futures contracts, options, or other derivatives, how does that eventually get translated into future inventory at a locked in price? Don't dealers acquire most of their physical inventory from wholesale dealers?