Physical vs. Paper

I believe the age is upon us where we will start seeing more and more of the phenomenon charted below:

(img from 0hedge)

The price of precious metals is set by total market demand, of which physical is a small part.  Most price action is in the form of paper: futures and ETFs.  According to CME, approximately 20 million ounces of gold each day are traded in futures, and 2.4 million ounces a day are traded in ETFs.   22.4 million ounces of gold in "paper" traded each day.... but how much of it actually exists?  Here lies the explanation to the above chart.  If all "paper" metal was backed by "physical", demand for physical would correlate well with the price of the metal.  Unfortunately this is not the case...  acute hedge fund managers and the majority of "doomsday" economists have known for a long while about this manipulation in the precious metals market.... but like traditional fractional reserve banking, this fraud won't end in disaster unless a large number of people demand the physical metal backing the ETF or future contract at the same time.  What's worse is that most of largest ETFs and futures contracts do not contain any clause that says you can redeem anything physical for your "paper" metal.  Instead, you typically can find a trustee certificate of some sort, in which a third party (party other than the issuer of the ETF or future) guarantees that the precious metal is stored safely in the vault somewhere and is somehow audited on a regular basis (best case scenario).  However, these audits DON'T HAVE TO CONFIRM WHETHER OR NOT THERE IS ENOUGH PHYSICAL TO BACK EXISTING PAPER CONTRACTS.  Banks/trustees are using physical like the basis for loans in a fractional reserve system: continuously selling the metal in paper form while each time holding a fraction of what they sell in physical reserves.  So what happens?? How does this end??? It ends with physical metal and paper metal being sold at different prices, or with organizations providing paper precious metal securities eating massive losses.  The catalyst for this is the continued difference between paper and physical demand.  If continued demand for physical (instead of paper) precious metals persists, mining companies (who have been getting royally screwed in this entire process) and the physical demand will begin driving the price.  Either way it's going to end up as a shit show, buy yourself some physical silver.