When most large gold buyers want to buy physical gold, they’ll call a major bank or a large gold dealer. Yet the contract says they own gold on an “unallocated” basis. That means there are no gold bars that have their name on them.
In practice, unallocated gold allows the bank to sell the same physical gold ten times over to ten different buyers. If every holder of unallocated gold showed up all at once and demanded their gold, there wouldn’t be nearly enough to go around. It’s paper gold.
Right now it seems that there are some imbalances in the paper gold market, indicating serious shortages of physical gold. The whole scheme could come apart, which would create a huge price spike. This article’s a bit technical, but just realize that something doesn’t add up.