"DCFM, I wonder what happens to those who think they own gold yet cannot even obtain a cash settlement due to the overwhelming request for redemptions? Sounds crazy...however with a 100 to 1 paper to gold ratio it could certainly happen."

That is definitively the major question in this Ponzi scheme.

All these non gold backed gold accounts have risen significantly in value over the last 8 years and you ask yourself how the operators of these accounts (banks, investment funds) have been able to finance the incremental value of these accounts. Since gold has been the best performing asset during that period only gold options or futures come to mind as adequate instruments to back up these fiat gold accounts. However, considering the scale of the major Gold ETF it would probably be an impossible task to find counterparties in the market taking the short side. On top of that we know how the short side plays with the longs in those markets.