The idea that these entities that own physical gold in a vault should be understood within the realm of the world of gold and how these papers trade.
As an example, if monetary policy is determining to keep the price of gold down so as to lessen inflation fears, the Federal Reserve will lease some of it's gold to say JP Morgan Chase. Or the Federal Reserve can "deposit" gold with the Bank for International Settlements in Switzerland, who will then lease to commercial banks for the writing of contracts at 10 to one leverage. This gives JP Morgan Chase or other commercial banks the legal ability to write forward contracts on gold that they "own" so long as the contracts expire before the lease of their gold, with this leverage they are allowed to write contracts for 10 times the amount of gold they "own", that is stored in a "vault". This gives the Federal Reserve the dual goodies of income from gold leasing and downward pressure on gold prices far in excess of any effect the government could have by selling the physical gold. It gives the contract holder the ability to state that all of their contracts are backed by physical gold in a vault.
In reality all of the owners of the contract have a contract that states there is physical gold backing the contract stored in a vault and not physical gold. The nature of the contract is the assumption that not everyone will seek delivery of gold, so therefore confidence can be maintained in these pieces of paper. If contract holders do as the Hunt Brothers governments will change the rules.
Some suspect the reason the German government is being forced to wait 7 years for their 200 tons of gold which they requested last year is that the gold is actually leased out by the Federal Reserve at the present time, since the Germans apparently do not have specifically identifiable bars on deposit with the US, only an agreement that US will deliver the gold. US would not even allow Germany an audit to prove they had segregated their gold. And the biggest problems with most contracts is the force de majeure clause which makes the contracts useless when you need them most. So at any one point in time, the German Government, the US Government, JP Morgan Chase and the ETF for the gold fund, could all rightly claim they have the same 200 tones of gold stored in a vault for them. Talk about the velocity of money!
In any case, there are issues that could crop up on paper gold just when it would be the most advantageous to own gold so I prefer the physical gold. There are also vaults in Australia which would hold your physical gold for you as well as Harry Browne wrote.
