But what very few investors know is that this metaphor can also be perfectly applied to the gold and silver markets.
And that, for a simple reason : The size of the « paper » gold market in the form of certificates is 100 to 150 times larger than that of the physical gold market, the gold that exists for real.
So, when an important country such as Germany decides to repatriate its physical gold, thus revealing the Germans’ wariness about the possibility of recuperating their gold stored in the US, England and France, prudent investors should take this hint very seriously.
Even more seriously when we learn that it will take seven years for Germany to recuperate just a small part of their total gold holdings. This delay could not be explained logically if the gold were actually in the vaults of the New York Fed, the Bank of England and the Bank of France.
This 100 to 150 times leverage between physical gold and « paper » gold should be enough to alarm investors because when the music stops, there won’t be enough chairs (physical gold) for everyone and those holding those gold certificates will then understand the true meaning of counterparty risk.
Germany just reserved its chair, following in Venezuela’s footsteps, and this movement will accelerate, as I have been explaining for a year. Last country to date : Switzerland.
So, how do you hold gold ? Full or mutualized ownership ? Do you really have access to your gold ? Can you touch it ? Do you know the exact serial number of your ingots ?
Most investors who think they own gold really own paper, an illusion of wealth protection.
You have to know where your gold is stored, have a guarantee that no one else owns it, know the serial numbers of your gold ingots, have access to it and take possession of it if needed.
This is exactly what Germany is doing now.
This movement from « paper » gold to physical gold, still relatively discreet, may accelerate at any moment. And when it does, we will be watching one of the most important short squeezes in the history of the gold market.
(Short squeeze in the sense of the « paper » gold sellers being unable to deliver physical gold to the stock holders and, thus, being forced to buy physical gold on the markets, which would make gold’s price explode, or to go bankrupt and ruin those having invested in their « paper » gold financial products).
Credible countries such as Germany, China and Russia are converting more and more of their reserves into physical gold. You don’t see it much in the news but they are showing the way with their actions.
Once again, when this movement accelerates and the physical gold market retakes its position in determining the price of gold, we will then see a monumental short squeeze that will rocket gold to between $5,000 and $10,000 an ounce.