Eric King: “John, I know you’ve seen the chart that shows the expansion of paper claims vs available physical gold. Just when you think chart can’t go any more parabolic, it does. It has now hit a staggering 112 to 1. When does that matter, John?”
Hathaway: “It doesn’t matter until it does matter. Look, these bullion banks are extending credit to trading entities -- probably high-frequency traders, hedge funds, and the other usual suspects -- that don’t have any physical gold at all....
“These entities are just using the price of physical gold as an index -- it’s just like LIBOR. As far as I’m concerned, the more leveraged these entities are when things turn around, and then they realize they are obviously on the wrong side of the trade, the more explosive the upside will be.
Some are asking, ‘How far can they stretch the rubber band?’ We thought 90 to 1 was pretty stretched, and yet here we are at 112 to 1.
It ultimately comes down to the willingness of bullion banks to extend credit with very little connection to gold, other than using it as a reference point for profit and loss, to people with a huge amount of money so they can speculate. Let’s face it - the high-frequency guys who have been bashing gold for the last two years, if they decide to turn their trade around, they can drive gold to the moon.
These entities are just looking for profit. They are a bigger part of the market today than they were back in 2011. They don’t think in macro-terms -- they just look at charts. If they are running more money today, and if they are caught wrong-footed on the gold trade, that can be extremely explosive for the price of gold.
If we end up with the added fuel of various entities having the desire to own the physical gold instead of the paper contracts, that’s a double-barreled scenario that would guarantee an explosion in the price of gold.”
at http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/1/27_This_Will_Create_A_Massive_Spike_In_The_Price_Of_Gold.html
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