this is part 2 of the earlier article:

Did the ECB Save Comex from Gold Default? (Part 2)

A vast proliferation of OTC forward contracts and options defies the imagination. For example, as of 2001, the estimated total value of all gold ever mined in all human history, including that which has been lost in shipwrecks and buried forever in Roman ruins, would be worth about US$4.39 trillion at 2009 valuation of $920 per ounce. Additional gold has been mined since, but the difference is negligible, and my primary purpose is to show you the forest, not the trees. According to the June 2008 semi-annual report, Table 22A of the Bank of International Settlements, the total OTC gold derivatives market amounted to $649 billion, of which $428 billion consists of options. The numbers are probably much higher today.

In truth, however, only the tiniest of tiny portion of the world’s total physical gold supply is available to derivatives dealers. At the end of 2004 central banks and official organizations held 19 percent of all above-ground gold. Almost all the rest, is held in the form of jewelry, coins, and small hoards of private gold bars that are not on the market for sale, never will be, and are NOT available to derivative dealers. It is extraordinarily unlikely that $649 billion dollars worth of OTC gold derivatives are backed by physical metal. The disconnection between the availability of real metal and the availability of derivatives is even more extreme in the silver market.

http://seekingalpha.com/article/1297...