The physical gold delivery failure to clients of Deutsche Bank who own
Xetra-Gold, the gold exchange traded commodity, was confirmed yesterday by
Deutsche Bourse who said that the inability to deliver gold was not
limited to Deutsche Bank and that other German banks were having
“problems” delivering gold.
This is yet another example of a bank not making good on promises to redeem
their gold investment products, as seen with ABN Amro in 2013 and indeed
Julius Baer in recent months as we pointed out yesterday (see
here). It is the latest example of the unappreciated risk of owning gold
exchange traded commodities (ETCs), exchange traded funds (ETFs) and indeed
most institutional gold investment offerings.
Xetra-Gold filed an official response yesterday regarding the physical
gold delivery failure, one which can be read in German on
the following page and was reported and commented on by Zero
Hedge overnight:
What is notable is that instead of immediately refuting the story – as
it should have done if there is no breach of prospectus covenants – and
declaring that any and all physical gold demands have and will be satisfied,
Xetra took a very circular approach to responding, one which in effect
confirmed our concerns, that the issue was not so much with Xetra, but with the
sponsor bank, in this case Deutsche Bank.
Furthermore, the author of the original godmode article, Oliver Baron,
penned his own reaction, in an article titled “Deutsche Boerse takes a
stand.” He writes that “yesterday’s article “Xetra-Gold: Nothing but a scrap
of paper?” has struck nerves: Not only that GodmodeTrader was cited among
others, at “Zero Hedge” a financial website influential on Wall Street, but
also at Deutsche Bank and at Deutsche Boerse, where the article has caused
quite an internal stir, as Godmode traders was informed.”
He further writes that Deutsche Boerse Commodities has released a
fairly spongy formulated observation on the physical delivery of Xetra-Gold.
The key phrases are:
“The Deutsche Boerse Commodities GmbH points out that holders of
Xetra-Gold shares can at any time exercise the right to delivery of
securitized gold. Deliveries are made via a branch of a bank
indicated by the investor. The requirement is that the branch offers this
service because the delivery can take place only through the depository bank
of the investor.”
As we reported yesterday, what made this particular “failure to
deliver” notable is that the original client had asked for delivery via a
Deutsche Bank branch, the same bank as the ETC’s sponsor, which is why, as we
noted before, this appears to have been a problem involving not Xetra-Gold,
as much as Deutsche Bank itself.
Baron agrees. As he writes, “in other words, it
depends, according to Deutsche Boerse Commodities, on the particular bank
branch whether the physical delivery can be carried out.”
And, as we learned last night, it does appear that if the delivery is
requested at a Deutsche Bank branch, the answer is no.
But this is where it gets even worse. As Baron
adds, in a telephone conversation with the author, the Deutsche Boerse
Commodities exchange was unwilling to supply further
information to Godmode traders whether physical delivery is generally
feasible at most bank branches or not. And worst of all, “the
exchange was unable to name any bank which is in a position to deliver
physical gold without problems.“
Baron’s conclusion: “the “right” for actual delivery at Xetra-Gold is
theoretical: physical delivery is only possible if the respective bank branch
also cooperates. Suspicious gold investors should consider Xetra-Gold as
another form of paper gold and not as a physical gold investment.”
Our take is slightly different: while we already know that physical
delivery at Deutsche Bank appears to have been compromised, according to the
Deutsche Boerse response, the ability of any and every other bank in Germany
to deliver gold is now likewise questionable. Which begs the question: where
is all the physical gold?
The risks inherent in investing in gold exchange traded funds (ETFs) and
exchange traded commodities (ETCs) is something that we have warned of since
these new gold proxy investment instruments came on the scene in 2003.
See Beware
of Exchange Trade Funds (ETFs) Bearing Gold and watch the Bloomberg
video from 2012 below:
Physical
Gold Favored Over Derivatives at GoldCore: See Bloomberg Video Here
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.
Paper is paper, digits are digits and gold is gold. Gold is not a safe
haven unless the buyer owns actual physical gold in the safest way possible.
Why take chances with your safe haven asset and money? Test your gold
investment vehicle or provider today and see can you take delivery of at
least some of your allocation to gold.
If you can’t take delivery of physical gold, you don’t own gold. If you
cannot hold your gold, you don’t own your gold. Possession remains 9/10s of
the law. This will especially be the case in the coming global financial and
monetary crisis.
Gold and Silver Bullion – News and Commentary
Gold
steady ahead of U.S. jobs data (Reuters)
Gold
prices gain in Asia as investors cautious ahead of nonfarm payrolls
(Investing)
Gold
Volatility Falls to Year’s Low as Investors Await Jobs Data (Bloomberg)
US
Mint gold coin sales down 42% on year to 1.8 mt in August (Platts)
Shrinking
manufacturing activity surprise blow to economy, market shifts on Fed (CNBC)
Deutsche
Bank refuses clients’ demand for physical gold (RT)
TICKING
FINANCIAL TIME BOMB? Deutsche Bank ‘refuses’ customer demands for gold
withdrawals (Express)
Gold
withdrawals from New York Fed are increasing (Zerohedge)
Giant
Oil Companies Are Reaching Their Breaking Point (Casey Research)
How
Silver Prices Get Set – Butler (Silverseek)
Gold Prices (LBMA AM)
02Sep: USD 1,311.50, GBP 987.95 & EUR 1,172.74 per ounce
01Sep: USD 1,305.70, GBP 1,985.80 & 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
Silver Prices (LBMA)
02Sep: USD 18.75, GBP 14.15 & EUR 16.76 per ounce
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
Recent Market Updates
– Avoid
Paper Gold – “Gold Delivery” Refused By Gold Exchange Traded Commodity
– 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
