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Deutsche Bank Refuses Delivery Of Physical Gold Upon Demand

by Tyler Durden | Zerohedge

While the trading world was focused on the latest news involving Deutsche Bank, namely that the troubled German bank had been contemplating a merger with Germany’s other mega-bank, Commerzbank as part of a strategy to sell all or part of a key business to speed up its flagging overhaul, a more troubling report emerged in a German gold analysis website, according to which Deutsche Bank was unable to satisfy a gold delivery request when asked to do so by a client of Germany’s Xetra-Gold service.

But first, what is Xetra-Gold?

According to its website, the publicly traded company “provides investors with an efficient instrument to participate in the performance of the gold market. Xetra-Gold’s combination of features – cost-efficient trading and the right for physical delivery of gold – makes it an attractive product.”

…In other words, Xetra-Gold is an Exchange-Traded Commodity which differentiates itself by “representing that every gram of gold purchase electronically is backed by the same amount of physical gold” and its principal bank is none other than Deutsche Bank.

And with Germans recently rushing to buy safes or find sound money alternatives in a country where the interest rate is negative, the ETC, it is not surprising that the population has flocked to its offering.

…But what is most notable, is that, as noted above, Xetra-Gold investors are entitled to the delivery of the certified amount of physical gold at any time, and adds 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.”

However, something appears to have changed.

…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.

…In other words, what was supposedly an ETC which promised physical delivery upon demand, is nothing more than yet another “paper only” play.

We, on the other hand, have a more focused question: is the inability to deliver physical gold an incipient issue with Xetra-Gold, or with the company’s “designated sponor” Deutsche Bank, and if the latter is suddenly unable to satisfy even the smallest of delivery requests by retail clients, just how unprecedented is the global physical gold shortage?

PG View: According to the Xetra-gold prospectus, “Investors always have the possibility of demanding delivery of the securitised amount of gold per bearer note against the issuer.” Emphasis apparently on “possibility”!

It’s worth remembering what Jim Rickards said a couple weeks ago:

“Physical gold is very scarce; when the price really does break upwards, you’re not going to be able to get it. The time to get it is now.” — Jim Rickards

The Xetra-gold security may be the canary in the coal mine . . .

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