Banks were allowed lend more money than the owned/had, why can’t the same principle apply to gold?
This is the difference, the gold that people are asking the banks to send them is "ALLOCATED" specifically in their names (supposedly). In other words, it sits in the vault WITH THEIR NAME LABEL ON IT (supposedly).
We'll see just how wide a problem this becomes, stay tuned...
Not for allocated accounts. It means the gold is in the bank for storage/security and in return the owner pays the bank storage fees. Bank does not own the gold nor have the right to use it as collateral for loans and investments. Other types of gold accounts, the bank can borrow the gold. The theory is the shortage of physical gold is so bad due to over manipulation of unallocated gold accounts/paper gold accounts, banks are desperate enough to raid the allocated accounts which are illegal.
Problem with the story is we do not have the name of the bank and the account holder to verify the facts involved. It is like an unnamed sources making allegations. Hard to verify.
There was a case in Scotland where a woman trying to reclaim her physical gold assets from the Bank of Scotland had to wait months and after legal threats, the bank gave her gold back to her. But it took months and lots of hoop jumping before the bank delivered her gold back to her. It does make you wonder what some banks are doing with their clients allocated gold accounts.
I think the banks simply applied the same fractional reserve banking rule with gold/silver back when it was standard and multiplied it many fold when the standard was dropped