Let's start from the premise that it exists just as described by GATA, and that JP Morgan is the principle agent. We know they inherited Bear Sterns' position, so add that to what already exists, and you have one heck of a short-squeeze in the offing, correct?

Not so fast. What have we seen these past 2 years? The Fed recapitalized the banks by swapping bad MBS paper for treasuries, right? So, what's to stop the Fed doing the same with JPM's short position? Nothing that I can see. They simply swap those contracts for treasuries and JPM (as always) slips out the back door.

Right then, what does that do to the mother of all short squeezes the goldbugs are expecting? More to the point, what happens to gold when traders realize that short position is now in the hands of an agent that not only can't default, but that can settle in cash at its own convenience?

The mother of all crashes, that's what. And who's left to buy when gold hits the floor? Why the Fed of course. Fed buys in the shorts, that gold goes straight to Treasury, and new currency is issued to buy back the swap from JPM.

That's MY conspiracy theory...heh.

No more harebrained than anyone else's, I'd say.

ebear