this is from antal fekete's essay, "cut off your tail to save my face," on the manipulation of the gold and silver markets.

The latest severe correction in the dollar price of gold and devastation in the price of silver illustrates my point. The only rational explanation for this extraordinary decline in the midst of an extraordinary monetary crisis is the disconnect between the price of paper gold and the price of real gold.

Of course, we have known all along that the government considers it as its sacred duty to manipulate the gold price by hook or crook. The best way of going about it at this juncture is to engineer a disconnect between paper gold and real gold in the hope that the fall of paper gold will demoralize the market with the result that real gold will be dislodged even from firm hands. The delivery mechanism of gold futures contracts, and that of other forms of paper gold such as ETF’s, is made subject to manipulation on purpose.

Prices, price ratios, volume and open interest statistics, COT reports can be, and probably are, manipulated and falsified in order to mislead market participants and scare them away from real gold. They can have paper gold as much as they want, provided that they are willing to settle in cash. They are offered a posh spot in fools’ paradise.

But no matter how all these signals are manipulated or falsified, the basis is a pristine market signal that never lies. It can be neither manipulated nor falsified because it shows the divergence between paper gold and real gold. It is a seizmographic signal that picks up rumblings in the bowels of the earth half way around the globe, foretelling the coming of earthquake. The basis will tell you well in advance when all the offers to sell real gold or silver are about to be withdrawn in all the markets of the world.

Once that happens, infinite demand will confront zero supply. Don’t say it can’t happen here. It has happened locally in France in 1796, in Germany in 1923, in China in 1947, to mention but three episodes. This time it will happen globally.