The Achilles’ Heel of the fractional, unallocated bullion system is when the physical gold and silver falls short of derivative obligations to deliver real physical metal to the end-user buyer. By delivery I mean move the bars from London or NYC vaults and ship them to the receiving entity (often times its Central Banks that are repatriating their gold bars from London or NY).
Since Bretton Woods, there’s been three times when the physical market fell short of demand for deliverable physical metal: 1) the London Gold Pool in the 1960’s; 2) the attempt by France to convert all of its Treasuries into gold from the Fed and that led to Nixon closing the gold window; 3)and the Hunt Brothers run on the physical silver at the Comex. In the latter two instances, the entities making a run on the physical metal had figured out that there was more paper outstanding than physical gold/silver available to support the conversion of the paper claims. I think we are headed into the fourth – and final – time a run occurs on physical gold and silver. The market began transmitting signals in March 2020.