A “Short Squeeze” is a rapid increase in the price of a stock, bond, or commodity asset that occurs when there is a lack of supply and an excess of demand for the asset. Speculators “sell short” the asset using a derivative of that asset hoping to buy it back in the future at a lower price. They are required to close out their position with an equal quantity of the asset they “short”.
The Germans are now demanding their physical gold in lieu of holding a paper claim provided by the U.S. A problem occurs when the central banks lease out their gold into the market. That gold is removed from storage and a piece of paper is put in its place, a claim. Germany could physically reclaim all their gold in seven weeks but instead plans to take seven years. Why? I suspect their gold is not sitting in storage and the U.S. must buy it back from the market. Oops!
Venezuelan President Hugo Chavez demanded Venezuela’s gold back and got it. Other countries are doing the same. China and Russia are quickly and quietly adding to their gold reserves. In the meantime, the U.S. is expanding its money supply at breakneck speed. Thus whatever gold we have left will ultimately be unable to sustain the value of the U.S. Dollar if the global financial system were to return to some form of a gold standard. Other countries are moving toward a gold standard after having been given devaluing dollars as payment for their resources.
The paper claims against gold on a worldwide basis greatly exceed the actual known supply of gold. The same holds true for silver. Once holders of those paper claims demand the physical metal, the price will skyrocket and somebody will be left out in the cold.
You must ask yourself these two questions:
1. Why does Germany want their gold back?
2. Why does it take seven years to get their gold back?
The answers are obvious.