“A gift in secret blinds their eyes. They know not because they will not understand. None so blind as those that will not see. They have baffled their own consciences, and so they walk on in darkness.”

--Matthew Henry

Leased gold is sold in the physical market. The bullion banks pay a small (<1% for years, but ~1.5% these days) interest rate on the gold they sell. The central banks and treasuries said they view this as a way to earn some return on their gold reserves, but in actual fact it is a method of controlling the price of gold. The bullion banks re-invested the funds from the gold sales in other investments with greater yields in a play which became known as the gold carry trade, which hardly differed from the Yen carry trade, or the current US dollar carry trade.

Technically, this leased gold is still 'on the books' of the US Treasury, the UK Exchecquer, etc., as it was not written up as an outright sale However, the bars are long gone, and very likely never to be replaced. Should the bullion banks attempt to unwind the trade, as it is known, and buy back the gold on the open market to return to the central banks and treasuries, the price of gold would skyrocket. Look at what Sprott looking for a mere 10 tonnes for their investment trust has done to the POG this week.