Avoid Paper Gold – “Gold Delivery” Refused By Gold Exchange Traded Commodity

“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. Read more…