I received an email from someone who is Chinese with investments in Australia giving a view from the average person in China:
"Gold community in China is much different from western world. The customers are mostly old people (not discribed Chinese Dama [Bron - means middle aged married women]). Their only purpose is to preserve their savings (to against inflation) which earned by hard working of their whole life. When we go to Beijing's biggest gold shop and see some old couples sitting there, looking at gold price chart monitor with hopeless eyes (someone even have heart attack), we are filled with anger. Those good natured and hard working people, they don't chase equities or any kind of riskier investment, they buy gold for safety only. But now, the community is mostly hurted.
As for me, I only have a little gold less than 1% of my assets, but my very old father have a lot. He exchanged 25% of his savings to gold. When every week he met and ask me about gold's "cliff drop" and "volatility" and depressed several months, I can't explain to him exactly what happened. Chinese mainstream media are full of copies of wall streets comments and suggestions, I can't explain to my father clearly what is bullion bank's manipulation and I don't know how to make him happier. Such cases are numerous in China.
Bullion banks are not only making people suffer loss, but also destroying good faith and human logic. CMEgroup says Bullion banks' participation in gold/silver market is to "provide liquidity", but most of end buyers don't need such "liquidity" in the market. Bullion bank's trading is only for their own profit. Those "value-add" profit should belong to customer, miners and even you and your mint.
The problem come from huge naked short in thin time with no news in mid night electronic trading session or London fix, but sadly mid-night electronic session is afternoon in China, that triggers heard attack and depression of old people.
SGE already delivered 1782.997 metric ton in 2013 till October 25, about 15-20 times than Comex, we can't imagine why world price is controlled by a few of US banks."
Unfortnately it seems the average Chinese is no better informed than the average Westerner that we operate in a FIRE economy these days. That is why SGE's larger physical deliveries don't matter, as the ZIRP free money drives leveraged speculation in all markets, gold included. Simply the weight of this money in the gold market overwhelms the non-leverage money from the "good natured and hard working" just looking for safety.
So even if you got rid of fractional reserve banking, futures markets and manipulative trading tatics (which would help), you would still have this volatility as large investors could still borrow money at little cost and leverage up the little bit of their own money to buy a lot more gold. The consequence of that leverage is that it only takes a small change in price to threaten to wipe their capital out, resulting in quick and rushed liquidations back out.
And don't think that "China" is somehow not part of the problem. The same FIRE dynamic is in play in China as well, see this article or this on arbitrages using gold.
There was a great article out a few months ago called On the Phenomenon of Bullshit Jobs where he asks why predictions of a 15-hour work week never eventuated even though productivity increases could allow for it. He proposes that "rather than allowing a massive reduction of working hours to free the world’s population to pursue their own projects, pleasures, visions, and ideas, we have seen the ballooning" of bullshit jobs "as if someone were out there making up pointless jobs just for the sake of keeping us all working".
I propose a related phenonenom - that we are in a bullshit economy.
I am not confident that this is sustainable, which is why I have some gold insurance in my retirement savings account. All I can say to investors is to realise the bullshit FIRE dynamic that drives markets these days, be aware that this will result in large price swings, don't get all excited if we have a quick price rise as it could just be hot money that will flow out again, and remember gold is insurance to protect your wealth, not grow it.