For your first point, it's still useful to have it on blockchain, how? when you have gold asset (or any other precious metal), you can "destroy" it to create other asset(s) that have same total value (at max), so even when you're transforming accessories (melt a ring to make another) it's still recorded on the blockchain, as for other industrial and medical uses, they should be able to destroy the asset(s) without creating new assets, of course in the case of recycling facilities that extract gold from industry equipment, they would have to manually register the extracted gold as assets at a government office for example. Finally, for the black market, isn't the whole idea of this is to make gold moving transparent and prevent black market activity at first place? so if you try to sell some gold to black market without moving the asset on blockchain, government can catch corrupted employees/companies since if they do check up there will be missing gold that isn't reported.

For the second point, I'm not well informed in general stuff, but I guess in this specific application we don't need to register all the gold in the country reserve, only gold that goes into trading is required to be registered in order to track its movement.