If I was a Gold ETF...
There's a pretty big agreement about manipulation in the Gold and Silver markets, but a lot of speculation on how exactly it's being done by the different entities.
The following scenario is what I would do if I was a Gold ETF that wasn't fully backed...
If the market in Gold spikes, I would expect more people wanting delivery, because they are only going to want to hold it if it's going up.
Rather than handing out what little reserves that I had or buying high on the open market, I would sell it short.
How would I do that? I would borrow the Gold from a bullion bank and deliver that Gold to the people demanding delivery. This actually increases my reserve levels as people are demanding gold, it helps lower the price for Gold so it lowers the number of people demanding it. and it allows me to buy gold later to replace what I borrowed when there is less of a demand.
Actually I wouldn't do any of this, because I know what the end-game is, but if I were thinking like an unscrupulous ETF...
If this were actually happening, it would appear like more paper gold is being traded than actually exists. Inflation would seem lower than it should be and ETF's would be slow to deliver.
Sound familiar to anyone?