Since there are 100 times paper than physical. When the funds and central banks are selling, they will not care about the inventory since most are naked. Agents of central bank will sell the ownership as much as possible without real delivery. The price can go up only when there is very little physical left and everyone realizes that they are not able to deliver. Funds will panic to buy the shorts back. This can explain why the price swings so much. 2011 is a perfect example.
This type of market is prone to failure. That is why occasionally central banks have to sell real physical to save the agents (Bullion banks).
This type of market is prone to failure. That is why occasionally central banks have to sell real physical to save the agents (Bullion banks).
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