I’m closely watching developments out of Germany today. ZeroHedge reported this morning that Deutsche Bank (DB) has defaulted on its obligation to deliver bullion out from its European gold ETF. The fund in question is Xetra-Gold, an Exchange-Traded commodity fund which in the past has differentiated itself by representing that "every gram of gold purchased electronically is backed by the same amount of physical gold". The fund’s designated sponsor and principal bank is none other than Deutche Bank. According to the fund’s marketing materials, the fund differs from competing products because “Investors always have the possibility of demanding delivery of the securitised amount of gold per bearer note against the issuer.” The fund also claims that "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."
Something appears to have changed in 2016, and Xetra-Gold and Deutche Bank have informed at least one large shareholder requesting redemption that “the service” was no longer available, as of today.
This redemption default comes at a time when anxious savers in Germany and other countries subjected to negative interest rate policies of central banks are searching for alternatives to preserve and grow savings. The trend has manifested in efforts by Germans to hoard cash and precious metals, and can be confirmed by a huge upsurge in recent demand in Germany for personal safes in which to secure hard assets outside of the banking system. Until now, many have assumed that “paper gold” derivatives, such as ETFs designed to track the price of gold, were as good as the metal itself. However, the Xetra-Gold default has called this assumption into question. In fact, experts in precious metals, such as Jim Rickards (author of “The New Case for Gold”) have been warning for quite some time of hidden shortages of physical precious metals. Shortages in the physical market are masked by the paper-based derivative schemes in the gold and silver markets, run out of New York and London.
The take-away: People can make up their own mind about whether gold, silver or any other asset in physical form is in good way to preserve wealth and plan for the future. Many have come to this conclusion as rates on savings have fallen to 500-year lows. IF tangible, physical assets such as gold are part of your plan to mitigate risk of a financial crisis, it is now more important than ever to secure these assets under your own control. Troubles with delivering even small gold amounts to retail clients by Deutsche Bank may indicate that a global physical gold shortage is only growing. The day may come (and sooner than many suspect) that gold will stand tall as the Dollar, Euro and other fiat currencies collapse, but the actual physical metal may not be available at any price.
Here’s a link to the ZeroHedge article: http://www.zerohedge.com/news/2016-08-31/deutsche-bank-refuses-delivery-physical-gold-upon-demand
This post is here to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make or don’t make involves risk.
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