New Chinese Exchange Could Ignite Silver Prices
You would think that one paper ounce of silver would be backed by one physical ounce of silver. But that's not the case as we all know. So what happens when you buy paper silver and then want to take delivery of physical silver and there's no physical silver out there? Or what happens when you're short paper silver and you can't cover as there is no paper silver to cover with? You have to cover with physical silver, and there's none to be found.
This scenario could happen much sooner than later if some blogs are correct in their assertion that a new China commodities exchange becomes a reality in the next few months. Apparently this exchange (called PATH at last report) will allow normal citizens to purchase physical silver (no paper silver) in a no muss, no fuss manner. If this exchange does becomes a reality in the next few months as these blogs profess, then I would suspect that millions upon millions of Chinese investors will be buying physical silver -- no paper silver allowed here. And with that enormous new demand it doesn't take a rocket scientist to figure out that the price of silver would soon explode to the upside.
If this unfolds as predicted then the gigantic silver paper ounce transactions, both long and short, would probably soon unravel as there would virtually not be enough physical silver to cover both long and short positions. Something to think about.