by Jim Rickards, Daily Reckoning:

Many analysts say gold is volatile. But they should say that the gold market is volatile. That’s because most of it is paper gold, with only a small amount of physical gold to support it.

Think of the gold market as an inverted pyramid, with a small amount of gold at the bottom, holding up a huge amount of paper gold. The paper market could be 100 times the size of the physical market.

That means there are 100 paper claims upon each ounce of physical gold. Imagine a coat check at a restaurant issuing 100 claims for one actual jacket. Well, there’s only one coat so 99 claimants are out of luck.