If one is investing paper gold with licensed commercial banks, SC approved finance instituition, there is nothing to fear about. Banks won't default your paper gold account/money in it, unless the bank totally goes under.
When banks offering gold account, whenever customers investing in it, banks usually will take up hedging position already, so if gold price goes up, their hedge/option value goes up as well which enable them to pay you whenever you want to redeem/sell your gold in the gold account.
Banks won't be stupid with naked position, without gold hedging position to start with.

Banks interested to make profit through the spread, whether gold price goes up, goes down, doesn't matter nor interest them.
The situation is same with forex, they earn you from the spread between buy or sell. Currency appreciation or depreciation doesn't matter for them, nor affect their profit or not.

Except one is investing with non-licensed third party company, which is different story all together.