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"There was a time that I would have dismissed that idea as manic. Now it is a different story.
The cash market in anything does not command the price. The leveraged market is most powerful where prices are concerned.
I see the tight gold bullion cash market as the one that causes the short side significant bankruptcy rather than the violent paper gold market as the "Out of Control" banking problem ignites unstoppable rockets that blast the price of gold to unexpected levels in a straight line. The price violence you see now is because of this cash market versus bullion market relationship.
Today, insolvency in the hundreds of billions can happen anywhere. There was a day when the guarantee of the clearing house, the exchange itself ,and the member's personal wealth that stands behind the paper gold contracts was more than satisfactory for comfort. In today's world of monumental insolvency nothing can be considered sacred in terms of financial guarantees by market participants or orderly prices.
The bottom line is never say never.
Regards,
Jim"
Jim Sinclair at http://www.jsmineset.com/home.asp
