[bk1000]

Thanks. That likely explains then why they are taking seven years to return the gold. They ain’t got it! Shame I lost all of mine in that tragic boating accident...

[KarlInOhio]

Even if they do physically have the gold, they don't have enough once short selling occurs. Let's say person A deposits 100 ounces of gold. Person B borrows it and sells it to C. Then person D borrows C's gold and sells it to E. Now A,C and E all "own" that same 100 ounces of gold even if it has never actually moved off the shelf in the vault. If A shows up at the bank and demands his gold back the whole house of cards will collapse. And heaven forbid if A, C and E all demand their gold at the same time.

With currency, the bank can hem and haw for long enough to borrow some more cash from the Federal Reserve or the government can even print some more to cover the run. Other than trying to sneak in some tungsten (it's as heavy as gold, so it's just as good), there is no way to just create gold out of nothing to end a run. The fact that Germany has agreed to wait for seven years means that we were likely a hair's breadth away from a total run on the gold market. What will happen to the gold prices when they have to deleverage the market over the next few years to free up the German gold, I have no idea.