When people say things like that what they usually mean is the volume of bets on the price of gold in the futures markets is much larger than the trading in either physical gold or ETFs representing physical gold.
Which doesn't mean ETFs like GLD are not real. It just means that if I say I'll bet you the price goes up, we settle the bet at $100 for each dollar the price moves, that is independent of us actually owning any gold.
>Which doesn't mean ETFs like GLD are not real. It just means that if I say I'll bet you the price goes up, we settle the bet at $100 for each dollar the price moves, that is independent of us actually owning any gold.
Whats your definition of real if it doesnt involve physical gold? An ISIN existing? Sorry if that sounds passive aggressive, i cant figure out how else to word it.
There seems to be another definition of paper gold i am missing? I always assumed it was clear we are talking about derivatives.
Ok fair enough - I was unclear on the definition of paper gold. But the idea that
>There is a belief that there exists a lot more paper gold than actual gold. So when the run on the reserves starts, the price of gold will explode as billions of dollars worth of gold in the market disappears.
is probably not representative of what would happen. Derivative bets can come and go without really moving the spot price.
While again i dont disagree with your conclusion, i believe your arguing here is flawed. The derivatives can and do move the price significantly. JPMorgan payed quite hefty fines for manipulating the precious metal markets (as well as treasuries) through spoofing¹. Thats now happening by dumping significant volumes of derivatives onto the market at times its especially thin. Which can be in the order of magnitude of yearly productions. Combining this with bots trading trends prices can be moved significantly.
But again, due to golds importance from the monetary perspective, significant price increases are not going to happen. It could be seen as currencies devaluing, thus lending out central bank gold reserved to achieve price stability is very much on the table. I believe it was Greenspan that talked about this in the past.
Which doesn't mean ETFs like GLD are not real. It just means that if I say I'll bet you the price goes up, we settle the bet at $100 for each dollar the price moves, that is independent of us actually owning any gold.