Once you put that scenario in your head, think about the physical markets. It is pretty well known that physical precious metals are in very strong demand, and it is also very well known that physical holders are very strong hands. They aren't going to sell due to a 30% correction, in fact they are buying more to hold for the long term. Along with that, physical gold is heading to the East at an extremely fast rate. There is speculation that India's government put the regulations on importing gold to slow down physical entering the country in order to protect the dollar. The East, like physical investors, are also extremely strong hands. They likely don't ever plan on selling.
For those of you that are forward thinking, I am sure if I got you this far, you likely already know what the bigger play is. JP Morgan and friends selling naked short have a very well thought out plan for their madness. With Goldman continuing to slam gold with downgrades and lowered price targets, they are actually making it very obvious. As they are slamming the paper markets lower, physical is drying up. I think the probabilities of these bankers accumulating physical gold is extremely high, likely above 80%. Think about it.. once they own a massive amount of physical gold and silver, they have the power to wreak havoc on the paper markets with their short positions. They can start covering their naked shorts and the paper markets would start to explode. Every time they got the feeling the market would head lower, they could just hit the ask with thousands and thousands of contracts just like they are currently doing with the bid. This would bring in new longs, trend traders, long term investors, people that missed out on the last move from $250 an ounce, short covering etc. Physical supply would be drying up on every move higher, as it is on every move lower, but this time people would actually be paying attention to it.
Maybe it's just me thinking out loud being a nutty conspiracy theorist. But, what's the risk/reward on the big banks part? Risk is they get caught and pay the government a billion dollars or a few, also known as pocket change to these banks. Reward is they get total control over the price of gold and make massive amounts of money on the manipulation of the paper markets while accumulating and then owning the physical. To me that is a pretty good risk/reward barring all morals.
I'm not saying go out and buy as much gold and silver as you can in either market or anything like that. I'm simply stating what I think is happening right now and over the next few years in the physical and paper markets since it is extremely obvious that supply and demand are off balance between the two.
Here is what Jim Sinclair thinks, although I think it is a bit far out there, it is interesting to listen to if you have time:
