"According to
Andrew Maguire, on Friday, April 12, the Fed’s agents hit the market with 500
tons of naked shorts. Normally, a short is when an investor thinks the price of
a stock or commodity is going to fall. He wants to sell the item in advance of
the fall, pocket the money, and then buy the item back after it falls in price,
thus making money on the short sale. If he doesn’t have the item, he borrows it
from someone who does, putting up cash collateral equal to the current market
price. Then he sells the item, waits for it to fall in price, buys it back at
the lower price and returns it to the owner who returns his collateral. If
enough shorts are sold, the result can be to drive down the market price.
A naked short is when
the short seller does not have or borrow the item that he shorts, but sells
shorts regardless. In the paper gold market, the participants are betting on
gold prices and are content with the monetary payment. Therefore, generally, as
participants are not interested in taking delivery of the gold, naked shorts do
not need to be covered with the physical metal.
In other words, with
naked shorts, no physical metal is actually sold."
http://www.paulcraigroberts.
http://www.paulcraigroberts.
