What they really hold is a piece of paper that says they "own" some gold that is "somewhere" and when they turn in that piece of paper "someday" they will get theirs.
What they don't realize is that without owning physical gold, they own a piece of paper.
And some people (as well as central banks) who think they own physical gold actually own physical tungsten. I used to own gold until my second tragic yachting accident. In the first accident I lost all my guns. I need to stay on land.
That's the theory, but when people bought gold and let MF Global (John Corzine)hold it for them, it became part of the MF Global bankruptcy and they lost money on it. -Tom