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In September 2016, BullionStar produced research into how many tonnes of physical gold were actually held in the LBMA vaulting system in London[16], concluding that there were 6500 tonnes of gold in the London market, 4725 tonnes of which was at the Bank of England, leaving 1775 tonnes at the other vaults.
Of the gold in the other vaults, 1679 tonnes was held in allocated form by the gold-backed ETFs, again meaning that there was a very small residual (less than 100 tonnes) to back total outstanding unallocated account claims.
Even if the bullion banks have access to borrowed central bank gold stored at the Bank of England, that gold is owed to the lending central banks, and therefore has multiple claims on it. If there was a run on the fractional reserve bullion banking system by customers wanting to convert their unallocated positions to allocated gold holdings, analogous to a bank run where all customers want to withdraw their cash at the same time,
then this could lead to some serious problems in the ability of the bullion banks to provide the required gold. Such a situation would undoubtedly require cash settlement of customer positions, a move which would see the price of paper gold collapse, while the price of physical gold would skyrocket.
https://www.bullionstar.com/gold-university/bullion-banking-mechanics#heading-3