“Delivery of gold” has been refused by a popular German gold exchange traded commodity (ETC), Xetra-Gold, which is offered by Deutsche Bank, in the latest example of the risk of owning gold exchange traded commodities (ETCs), exchange traded funds (ETFs) and indeed most institutional gold investment offerings.
Like many gold exchange traded funds and commodities, the German ETC offered the ability to take physical delivery of the gold. As reported by Zero Hedge:
“Since the introduction of Xetra-Gold in 2007, investors have exercised this right 900 times, with a total of 4.5 tons of gold delivered.”
However, something appears to have changed. As Oliver Baron reports, those who ask for gold delivery at this moment, “could encounter difficulties.” The reason is that according to Baron, a reader of GodmodeTrader “sought physical delivery of his holdings of Xetra-Gold. For this he approached, as instructed by the German Borse document, his principal bank, Deutsche Bank.”
At that point then he encountered a big surprise: the Deutsche Bank account executive informed the investor that “the service”, is no longer offered, namely exercising physical delivery at Xetra-Gold, for “reasons of business policy” and therefore the order form provided by Clearstream Banking AG for exercising Xetra-gold is no longer available.
Baron writes that since Deutsche Bank is no longer serving the physical exercising of delivery request of Xetra-Gold is remarkable, as Deutsche Bank is the “designated sponsor” as well as fiscal, principal and redemption agent of Xetra-Gold according to its prospectus, and as the explainer of how to exercise physical delivery also reveals. Even if one is a customer of another bank, Xetra-Gold should – at least on paper- guarantee delivery by way of Deutsche Bank, as the Deutsche Borse Commodities GmbH explains in its “process description for exercising units.”
The question that arises is whether this supply issue is impacting Umicore, Deutsche Bank and the wider institutional gold market in Germany. If so it could signal wider institutional supply issues as Germany remains the largest buyer of gold in the EU and one of the largest buyers of gold in the world.
High net worth clients of ours have encountered similar issues in seeking to take delivery of their gold from the Julius Baer Physical Gold Fund. Even clients who had allocated more than $1 million to the fund were prohibited from taking delivery despite the promised “option of redeeming shares for physical gold”. Indeed, some moved from Julius Baer to GoldCore Secure Storage after they “tested” the physical redemption clause and were disappointed by the inability to take delivery.
It is worth remembering that clients of ABN AMRO, the largest Dutch bank and one of the largest banks in Europe , were also refused physical delivery of their precious metals in 2013.
ABN AMRO announced in a letter to clients in April 2013 that that it would no longer allow them to take delivery of their bullion including gold, silver, platinum, and palladium bullion coins and bars. Instead, they paid the precious metal account holders in the euro equivalent to the current spot value of the precious metal.
As we wrote at the time:
Thus, instead of legally owning a risk free, physical asset (a bullion bar or a bullion coin), the bank’s clients were unsecured creditors and were exposed to the bank and the financial system – somewhat defeating the purpose of owning precious metals.
The move highlighted once again the importance of owning physical bullion either in your possession (be that be in a safe or vault in a house, in the attic, under the floorboards or elsewhere in your possession) or in a secure vault in a country that is stable and respects property rights.
Paper, digital and financial proxies for gold are not real gold. Hence the importance of owning coins and bars either in one’s possession or in allocated and segregated storage in the safest vaults in the world.
Gold and Silver Bullion – News and Commentary
Gold above 2-month lows as dollar slip (CNBC)
Gold Holds Monthly Drop as Payrolls in Focus for Data-Driven Fed (Bloomberg)
Chicago PMI falls more than expected in August, missing consensus (Investing)
American Eagle coin August sales fall yr/yr as prices ease (Reuters)
Gold hits two-month low, but portfolio manager sees a rebound ahead (CNBC)
Deutsche Bank Refuses Delivery Of Physical Gold Upon Demand (ZeroHedge)
$5 billion in notional gold dumped into futures market (ZeroHedge)
Bond king Gross says Fed has “mastered market manipulation” (CNBC)
Fed is destroying “capitalism’s business models” – Bill Gross (ZeroHedge)
Britain’s latest rise in property prices is just the calm before the storm (BusinessInsider)
Gold Prices (LBMA AM)
01Sep: USD 1,305.70, GBP 9,985.80 & EUR 1,172.13 per ounce
31Aug: USD 1,314.45, GBP 1,000.30 & EUR 1,179.19 per ounce
30Aug: USD 1,318.85, GBP 1,008.39 & EUR 1,180.90 per ounce
26Aug: USD 1,324.90, GBP 1,002.95 & EUR 1,173.33 per ounce
25Aug: USD 1,324.50, GBP 1,001.06 & EUR 1,172.98 per ounce
24Aug: USD 1,337.30, GBP 1,010.73 & EUR 1,185.38 per ounce
23Aug: USD 1,338.50, GBP 1,015.25 & EUR 1,181.09 per ounce
Silver Prices (LBMA)
01Sep: USD 18.65, GBP 14.08 & EUR 16.73 per ounce
31Aug: USD 18.74, GBP 14.27 & EUR 16.82 per ounce
30Aug: USD 18.78, GBP 14.35 & EUR 16.82 per ounce
26Aug: USD 18.67, GBP 14.15 & EUR 16.54 per ounce
25Aug: USD 18.50, GBP 14.02 & EUR 16.39 per ounce
24Aug: USD 18.84, GBP 14.23 & EUR 16.70 per ounce
23Aug: USD 18.98, GBP 14.40 & EUR 16.75 per ounce
Recent Market Updates
– Debt Bubble in Ireland and Globally Sees Wealthy Diversify Into Gold
– “Why Case Against Gold Is Wrong” – James Rickards
– Obama To Leave $20 Trillion Debt Crisis For Clinton Or Trump
– Gold Bullion Averages Biggest Seasonal Gains in September Over Past 20 Years
– Gold Futures See Massive $1.5 Billion “Non Profit” Liquidation In “One Minute”
– Jim Grant Is “Very Bullish On Gold”
– Germans Warned To ‘Stockpile’ Cash In Case Of ‘War’
– Ireland’s Biggest Bank Charging Depositors – Negative Interest Rate Madness
– Rothchilds Buying Gold On “Greatest Experiment” With Money In “History of the World”
– Gold – “Mother of All Bull Markets Has Only Just Begun” – Grandich
– 45th Anniversary Of Nixon Ending The Gold Standard
– Gold In UK Pounds Collapses 38% Versus Gold and 56% Versus Silver Year To Date
– Will Ireland Be First Country In World To See Bail-in Regime?
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