Okay guys, I know this is a pretty bold idea, and I hate to stick my neck out like this... and I'm not claiming any insider knowledge or anything... I'm just saying that I've been watching some movements around gold lately and I've come across something that I think we should all at least be aware of, because the implications are huge, and we should all be ready for the worst.

This woman got me really interested: a World Bank Whistleblower (interviewed on Russia Today here) - she talks about corruption in the World Bank and more, but she gets pretty intense when she starts talking about gold backwardation. Listen to her (go to around 4m50s) The anchor immediately stops her at this point, despite the fact that the whistleblower said "the whole system is going to come to a screeching halt, probably in a matter of weeks, with something called GOLD BACKWARDATION" - which is a pretty tantalizing statement (there is a subsequent interview with Alex Jones where she talks more about it here)

I had never heard the term 'gold backwardation' before... but suddenly in the last few days it is in the mainstream financial press, and it is related to gold - look at this. Reuters is even talking about it). I've been checking all the mainstream news for gold over the last few months, so I know that this discussion of gold backwardation is a new thing. And it is exactly in line with the World Bank whistleblower's prediction, which was in June.

So, Gold Backwardation - what is it? Business Insider describe it like this:

"Commodities like gold will have a futures price and a spot price. The futures price is the price you'd see on a contract, which is traded on an exchange like the NYMEX. The spot price is the current price of the commodity. Backwardation occurs when the spot price is above the futures price. Typically, these two prices converge when the futures contract matures."

Boring right? Wrong. This is a big deal. Why? Because demand for physical gold is outstripping supply for the first time in a long time. There is about 100 times more paper gold (ie. promises to pay back the lender gold - or the cash equivalent) in the world than there is actual gold. So if investors realize that there is a physical gold shortage (which is what seems to be happening now), then a lot of people who own paper gold will sell it immediately in order to get physical gold. Paper gold will become worthless as the price of physical gold sky-rockets and the issuers of paper-gold-promises realize that they cannot pay what they promised. We are talking about some major banks defaulting here. It is going to be a huge mess. It is impossible to say for sure, but I would think it is a safe bet that this would take the economy down... not just the US economy either. Also, it might be worth mentioning that China (and some other eastern countries) are buying gold at an ever-increasing, and furious rate.

Remember in April when the price of gold plummeted? There was some compelling evidence that the price of gold was being manipulated in order to help the powers that be deal with all their promises to pay back gold. This all fits in with the theory - because it shows the powers that be try to reduce the price of gold to reduce their exposure.

The reason the big banks would have gotten into this mess is simple: They found it really easy to make money by printing up a piece of paper that they could sell for the price of an ounce of gold (say $300 a few years ago) in return for promising to pay back the purchaser (ie. lender) the $ equivalent to an ounce of gold in the future. When the price of gold went up to $1900, these banks would have realized how over-leveraged (ie. in debt, overexposed, screwed) they were and most likely did whatever they could to manipulate the price of gold down.

It is theoretically easy to manipulate the price of paper gold (by flooding the market with more paper gold - which is what I think the banks did)... And the price of gold has fallen significantly from the $1900 level (although some of this drop in price was probably due to other factors).

The reason that flooding the market with paper gold will bring down the price of physical gold is that the 'spot' price (a.k.a. the selling price) of gold is linked not to physical gold, but to paper gold. However, while the owners of PAPER gold have been selling like it is going out of style, the owners of PHYSICAL gold have been holding on to their gold and saw the drop in price as a golden opportunity to buy more. Demand for PHYSICAL gold has been incredibly strong the last few months, and now it seems like physical gold supply is starting to run out...

Meanwhile there are many owners of paper gold who believe that their paper is backed by physical gold sitting somewhere in a vault (although this is rarely the case). When the defaults start, these poor (or soon-to-be-poor) people are going to get a shock.

TL,DR: Essentially what this post is all about is the diminishing supply of physical gold. I'm just looking at the early signs here, but once it becomes obvious that physical gold supply is running out, that's when everything will go crazy... economic collapse, brought on by gold backwardation, as predicted by a World Bank Whistleblower just a few weeks ago.

I hope I have explained this in a way that you guys can understand what I'm trying to say. I have spent a long time reading stuff about the gold market, and it is still tough going. The gold market is very mysterious to those of us on the outside, and probably even to those on the inside, so there is no way of knowing if I am misreading something... so I do encourage some feedback here.

Edited for clarity.

Edit: http://www.businessinsider.com/institutions-sell-most-stock-since-2008-2013-7 - maybe possibly related...