why the fundamentals are changing, page-9

During the last bear market, the bullion banks switched from being net short to net long in 1996, a few years before gold finally left $300/oz behind for good in 2001/02. There was a nice chart showing this on Jeff Kern's site but the link has been removed unfortunately. So JPM turning long doesn't mean a short squeeze is eminent, imo

As for the paper market driving price down, what many of these analysts ignore rather conveniently, is the large tonnages of bullion being exported from former importers, UK and US. Switzerland is also importing less gold on a net basis compared with several years ago. It very much appears that large investors in the West have been selling, driving the price lower and resulting in the the demand response from China.

China's demand is essentially a run on the fractional banking system, but as the Perth Mint's Bron Suchecki is explaining in a series of 8-10 essays on his blog, the system has been coping rather well. What will be interesting to see is China's demand response to higher prices, e.g the latter part of 2011 when imports declined significantly.

http://goldchat.blogspot.com.au/