Thread by @SunilRe89392848

🧵(a thread) FRACTIONAL GOLD SYSTEM — IS YOUR ETF SAFE? (Part 1)
1️⃣/10
Most people think when they buy gold through an ETF or a bullion account, there’s a bar with their name on it.
But in reality, your gold likely exists only as an IOU — not a bar.
Let’s decode how this fractional gold system really works 👇
#gold #Silver #silversqueeze

2️⃣
Start with 1 real bar (400 oz) sitting in a bullion bank’s vault.
Now watch how this same bar is turned into many paper claims across multiple markets.

3️⃣ Step 1 – Unallocated Accounts
When you “buy gold” through a bank, you get an unallocated account — meaning you don’t own any specific bar.
➡️ The bank keeps the gold as its own asset,
➡️ and shows your gold balance as a liability — “gold owed to client.”

So the same bar stays on the bank’s books, even though you think it’s yours.

4️⃣ Step 2 – Reuse as Collateral
Since the bank still owns that gold on paper, it can now pledge the same metal as margin for futures trades on COMEX.
Each COMEX contract = 100 oz.
Your 400 oz bar can support 4 futures contracts.

➡️ One bar, multiple paper claims.

5️⃣ Step 3 – ETFs (like GLD)
Authorized Participants (APs) — often the same bullion banks — use these unallocated accounts as “backing” to create ETF shares.
The ETF reports “gold held,” but that gold is often unallocated — just another claim on the same underlying pool.

6️⃣
At this point, that single 400 oz bar has been:
1) booked as the bank’s asset,

2) owed to clients as a liability,

3) pledged as margin on futures,

4) and used to back ETF units.

All from the same metal.

7️⃣
The system works fine as long as no one asks for delivery.
Like banks lending deposits — it runs on confidence and low redemption.
But if too many investors demand real gold, the illusion breaks.

8️⃣
That’s when you see:
⚠️ Spiking lease rates
⚠️ Backwardation in futures
⚠️ ETF redemptions freezing
⚠️ Cash settlement instead of delivery
Because the “gold” was mostly paper leverage

9️⃣
So when your ETF says “backed by physical gold,”
what it really means is — backed by claims on bullion banks who still treat that gold as their asset.
Fractional, not full reserve

🔟
This is how the fractional gold system works —
a web of promises layered over a limited pile of bars.