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.

--Comex December gold settled at record $1,891.90 a troy ounce, up $39.70, or 2.1%

--Hopes that Fed will hint at more stimulus buoy gold

--SPDR Gold Shares ETF outpaces value of SPDR S&P 500 ETF as investors flock to gold

(Updates with platinum market information in final paragraphs and settlement price table.)


  By Tatyana Shumsky
  Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Gold ended at a new record high amid growing speculation the U.S. won't be able to resist another round of stimulus and broader worries about the global economy.

Meanwhile, a six-month-long civil conflict in Libya is drawing towards a conclusion, re-igniting concerns about political instability in the region.

The most actively traded contract, for December delivery, gained $39.70, or 2.1%, to settle at a record $1,891.90 a troy ounce on the Comex division of the New York Mercantile Exchange. The contract touched an intraday record of $1,899.40.

Thinly traded August-delivery gold settled at a record $1,888.70 a troy ounce, up $39.80, or 2.2%, after touching an intraday record of $1,895.00.

Investors are eagerly awaiting Federal Reserve Chairman Ben Bernanke's speech at an economic symposium in Jackson Hole, Wyo., on Friday. Last year the Fed chairman raised the idea of further monetary stimulus in his speech, and many investors are buying gold in hopes of similar hints this year.

"Should Bernanke put a damper on [stimulus] expectations, the yellow metal could well experience the correction that potential investors have been impatiently awaiting," said Edel Tuly, a strategist with UBS.

While some investors are buying gold to hedge against inflation, which is likely to arise from another round of stimulus, others are worried the U.S. economy will slip into recession without such help and are purchasing gold to hedge against possible losses in other assets.

Gold prices are also rising amid renewed appetite for a hedge against political uncertainty. In Libya, rebels seized control over most of the nation's capital, Tripoli, over the weekend. The whereabouts of Libyan leader, Col. Moammar Gadhafi, are unknown.

Gold locked in its sixth straight trading day of gains and is trading just shy of $1,900 as market participants continue to buy up the precious metal.

Investors have voted with their dollars as the cloudy prospects of the U.S. economy and rising stock market volatility sees more funds channeled towards gold.

The value of SPDR Gold Shares (GLD), the world's largest physical-gold-backed exchange traded fund, surpassed that of SPDR S&P 500 (SPY) ETF Friday. Net assets for SPDR Gold Shares totalled $76.67 billion as of Friday, outpacing the $74.38 billion of the S&P ETF.

"While investors may be using gold to tactically hedge against current market concerns, there is a long-term strategic case for gold in all market cycles," said Jim Ross, senior managing director and global head of SPDR ETFs at State Street Global Advisors, the marketing agent for SPDR Gold Shares.

However, gold's record high prices leave it vulnerable to a pullback of $50 or $60 as longer-term investors may decide to cash in some of their gains, said Scott Meyers, senior trading analyst with Pioneer Futures.

"People who are joining the rally right now are getting in a bit late," Meyers said.

Platinum settled at a three year high amid spill-over buying as investors seek to diversify their holdings of precious metals. Platinum's success, in particular, was also aided by hopes of an early recovery in Japan's automotive production, which was stalled by a massive earthquake and tsunami earlier this year, said George Gero, vice president at RBC Capital Markets Global Futures.

Platinum is widely used in making car exhaust filters, known as catalytic converters.

Platinum for October delivery, the most actively traded contract, settled at $1,905.70 a troy ounce, up $30.80 or 1.6%, after touching an intraday high of $1,906.80.


Settlements (ranges include open-outcry and electronic trading):
London PM Gold Fix: $1,877.50; previous PM $1,848.00
Dec gold $1,891.90, up $39.80; Range $1,858.00-$1,899.40
Sep silver $43.325, up 89.3 cents; Range $42.475-$44.090
Oct platinum $1,905.70, up $30.80; Range $1,881.20-$1,909.90
Sep palladium $765.10, up $16.30; Range $743.50-$766.80
-By Tatyana Shumsky, Dow Jones Newswires; 212-416-3095; tatyana.shumsky@dowjones.com