"The concept of allocated bullion accounts was set up to allow participants to have secure ownership of metal without having to take possession and the responsibility for security of the metal. It was never geared towards any form of leverage, or fractional ownership, and has never been marketed as such. The people who put money into these schemes fully believe and expect that the bullion is there and has not been loaned, or leased, or forward sold to another party that can have a prefered claim on the metal."

You've hit the nail on the head as usual Coach. The Achilles heel of the Gold market is the threat posed by an unusually large and sustained demand for delivery of physical bullion by investors who have lost confidence in the Bankster's ability to deliver metal on demand. In other words the solvency of the Institutional holders is being questioned as evidenced by armies of auditors that are now inspecting world vaults. Too bad only large SWFs & Central Banks will ever know the results of these audits and have time to pull out their gold before word hits the streets that the cupboards are bare.

At any rate bear in mind this is a greatly simplified view however the fact remains the underlying problem with Gold markets is that they mimic the fractional reserve based Banking system where a small amount of cash on deposit is used as a reserve to create vast amounts of loans. Similarly in the Gold markets a small amount of bullion backs a substantially larger book of "Gold Loans" that can never be fully repaid with delivery of bars. The only problem is a growing number of those paper holders want physical bars, which places exponential stress on existing Gold reserves that cannot be replaced!

You see when a Bank runs out of cash reserves, the authorities can come to the rescue and prevent a run on the bank with freshly printed money to restore cash reserves & restore depositor confidence in the process. Unfortunately this is not an option in Gold markets that can prevent a Gold Bank run because Governments cannot manufacture real hard physical Gold at will to restore the reserves that underpin the multiples of Gold Loans that have been issued.

This is a huge and very real crisis that threatens the solvency of the Fraction reserve Gold system today, which is now sitting at a crossorads of lack of confidence due to lack of hard bullion reserves. The only way this can end is in a massive default in a large majority of paper Options, Futures, and especially ETFs, followed by a sudden sharp rise in the price of the real deal - especially in the sister fractional-reserve Silver markets. Our time is coming and not a moment too soon. We could see some real fireworks this year when Gold's 2-year cycle kicks into gear later this year.

ESL