As we get ready to kickoff the second week of trading in May, today the man who has become legendary for his predictions on QE, historic moves in currencies, spoke with King World News about when all hell is going to break loose, plus a rare behind the scenes look at the gold market.

The Big Con
Egon von Greyerz:  “The most expensive investment anyone can buy today is paper gold. For $1,230, an investor will get a piece of paper saying he owns 1 ounce of gold. But he is unlikely to ever see that gold…

Firstly, most investors who buy paper gold have no understanding of the real reason for holding gold and will therefore never contemplate taking delivery. And even if they did understand the importance of holding real gold, they are quite happy to hold the surrogate alternative which is paper rather than physical. This is of course what the issuer of the paper gold wants. These entities knows that paper gold buyers have no intention of taking delivery. This is perfect for the seller because they have no intention of making delivery either. And this is how paper markets function. Buyers and sellers are willing to trade pieces of paper that are said to represent an underlying instrument whether it is a stock, bond currency or commodity. 

Phony Paper Markets Won’t Last
But paper markets are illusory. They give the impression that the buyers acquire a real share in the underlying instrument. That would be the case if each unit of, for example, a currency or gold was backed by real money or real gold. But in today’s false markets that is far from the case. We live in a world of the Emperor’s New Clothes. The people are made to believe that the emperor is dressed in a suit made of gold, while in fact he is naked. And that is exactly how markets function today. Shorts are always naked, which means that there is never an underlying asset backing the short sale. What the buyer is getting is a piece of paper with zero intrinsic value. 

This is a perfect situation for central banks, banks and major trading houses such as hedge funds. With sufficient capital, they can manipulate any market without ever worrying about delivery. The result is markets which are totally fictitious that bear no resemblance to the instrument that is traded. 

That is why the price of a paper commodity has nothing to do with the underlying instrument. Paper trading can be leveraged hundreds of times or more, and whatever the price the paper market trades at sets the price for the actual commodity. Thus, the paper market sets the gold price. The gold price is the paper price that the false gold market trades at.  That has very little to do with the price of gold, which is what the physical market would trade at if there was not a manipulated paper market. But buyers and sellers are not concerned about the real price of gold because they have no intention of owning the physical since they don’t truly understand its function. …..More Here