Lane....
You asked earlier why the Gold folks like JPM, GS, etc. do not just cover their positions. Unfortunately for them it is not that easy since they have huge positions tied up in derivatives that will take a long time to unwind - it just affects too many other things that are interconnected in the derivatives themselves.
As for the borrowed gold that has been leased from Central Banks, most of it is gone. Not literally, but when it is loaned to a bank or gold dealer, it is then sold to other folks and so on. The lease agreements themselves are for one year at at time and normally are just renewed, with the gold never being returned (all of this is very simplified). I have no idea if it is true or not, but a number of serious folks claim that there is no longer any gold in Ft Knox, or the US Treasury that is ours - most of what is there supposedly belongs to Germany, who in turn has leased it to someone else. To back this claim up, they point out the changes in the wording of the annual Fed Report over the past decade or so, which now allows for there being no gold.
In reality, for most of the gold to be "unwound" it would have to be bought in the open market to be returned - and you are talking about a mind boggling sum of money for such a small market. The total amount of gold fluctuates, of course, but to give you an idea, the total capitalization of all the world's gold stocks is less than that of DELL. The bottom line is that if it starts getting away from them, an uncontrolled rise in the price of gold would bankrupt a number of banks and gold dealers.
Hope that helps a bit. If it all still seems murky, it is because there is no source of real information for a lot of it - for instance the Fed and Treasury will not comment on how much gold the US has.
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