"If you have short positions and paper gold to the extent that you have right now, the whole situation is distorted. The fact is, and I think there has been some really good work done on this recently, I mean there is so many paper claims on each good delivery bar, that if everyone decided one day that they didn't want their paper gold, they wanted the gold that was supposedly underlying it and they demanded it. It would just blow the top off the market and I think, before this is over, that will occur."

Once I got to this paragraph I couldn't believe him anymore. This guy's either purposefully lying, or doesn't know how futures contracts work. The "paper" in question is a futures contract, which is supposed to get settled in cash - most brokers aren't even set up to let you take physical delivery of "paper" gold, or any other "paper" commodity for that matter.

It never gets delivered, and that's the entire point of futures. In the language of the tinfoil-hatters, paper gold is "fiat" gold. :-)

As well, people who buy the futures are "leveraged" typically 10-1, so they could never pay for the gold if they did demand delivery.

This article sums up all the tinfoil-hat problems with the whole GATA argument:

http://www.financialsense.com/editorials/townsend/2010/0419.html

Executive summary:

• There is good reason to question JP Morgan’s concentrated short position in COMEX silver futures, and to investigate the allegations that JPM used it to manipulate the silver market.
• GATA has failed miserably in handling this matter, and has focused its attention on nonsensical and unproven conspiracy allegations pertaining to the London gold market (outside CFTC’s jurisdiction) when it has in hand very compelling evidence that is directly material to the still-pending CFTC investigation GATA should be the focus of their attention on the business at hand.
• Jeffrey Christian’s testimony at the CFTC Hearing has been taken completely out of context.
• Despite the best efforts of some responsible journalists including Jim Puplava, others including Tyler Durden (ZeroHedge) and Eric King (King World News) have contributed to the misinformation campaign by promulgating GATA’s baseless allegations.
• There are good reasons to be concerned about the ratio of “paper gold” to real gold, but they are not the reasons GATA has made so much undue fuss about.
• Investors should focus on understanding the true nature of their precious metals investment vehicles. The most popular are reviewed and contrasted.