LIVE Gold Prices $  | E-Mail Subscriptions | Update GoldSeek | GoldSeek Radio 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page 

 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

GoldSeek.com to Launch New Website
By: GoldSeek.com

Is Gold Price Action Warning Of Imminent Monetary Collapse Part 2?
By: Hubert Moolman

Gold and Silver Are Just Getting Started
By: Frank Holmes, US Funds

Silver Makes High Wave Candle at Target – Here’s What to Expect…
By: Clive Maund

Gold Blows Through Upside Resistance - The Chase Is On
By: Avi Gilburt

U.S. Mint To Reduce Gold & Silver Eagle Production Over The Next 12-18 Months
By: Steve St. Angelo, SRSrocco Report

Gold's sharp rise throws Financial Times into an erroneous sulk
By: Chris Powell, GATA

Precious Metals Update Video: Gold's unusual strength
By: Ira Epstein

Asian Metals Market Update: July-29-2020
By: Chintan Karnani, Insignia Consultants

Gold's rise is a 'mystery' because journalism always fails to pursue it
By: Chris Powell, GATA

 
Search

GoldSeek Web

 
Do You Really Own Your Gold?


 -- Published: Tuesday, 27 September 2016 | Print  | Disqus 

By Ted Bauman

What does it mean to “own” something? It’s a question you should be asking … especially if that something is gold.

The Oxford English Dictionary defines ownership as “the act, state, or right of possessing something.” That sounds about right. But what does it mean to “possess” something?

After all, you can own something that’s in someone else’s legal possession. For example, I own a house in Cape Town. My tenants have formal right of possession under a lease. I sleep at night because the sheriff of the Simon’s Town Magistrates’ Court will enforce my superior right of possession under South African law if needed — say, if they stop paying rent.

In other words, the “state or right of possessing something” that isn’t under your physical control depends on contracts and on law. That in turn depends on the ability and willingness of those who honor contracts — and enforce laws — to do so.

If you “own” precious metals under certain types of arrangements, you may be shocked to find that you’re in a legal limbo where ownership and possession are hazy at best.

It’s not a place you want to be.

Deutsche Bank Unter Alles

German mega bank Deutsche Bank is in serious trouble. The International Monetary Fund (IMF) has publicly called it one of the greatest threats to the global financial system. The Russian government (no doubt crying crocodile tears) is investigating its role in rampant money laundering. And the U.S. government has just announced a fine related to its behavior before the 2008 crisis that is more than the bank’s current market valuation.

Over the last few years, Deutsche Bank has been the principal banker and repository for a popular exchange-traded commodity fund (ETC) called Xetra-Gold. As you know, we here at the Sovereign Investor Daily don’t like metals ETFs and ETCs because you don’t really own any gold — just a claim on gold.

Xetra-Gold, however, differentiates itself from other ETCs by stating in its investor contract that “every gram of gold purchased electronically is backed by the same amount of physical gold” stored in the Frankfurt vaults of Clearstream Banking AG, a wholly-owned subsidiary of Deutsche Börse AG, one of Deutsche Bank’s subsidiaries.

Xetra explicitly says that every time an investor buys shares, a corresponding amount of gold is purchased and put into the vault, so that “investors always have the possibility of demanding delivery of the securitized amount of gold per bearer note.” Because of this promise, Xetra is extremely popular. During the first seven months of this year, order book turnover on Xetra stood at approximately €1.5 billion. The assets managed by Xetra currently amount to €3.5 billion.

But recently, an Xetra investor encountered a big surprise. When he went to arrange for delivery of physical gold, a Deutsche Bank account executive informed him that physical delivery “is no longer offered for reasons of business policy.”

Oops.

Dude, Where’s my Gold?

People piled into Xetra because it promised the small spreads and low fees of an ETC and the promise of quick physical delivery of gold on demand. Usually you get one or the other, but not both. It seemed too good to be true. It was.

As things stand, Xetra is a paper-only ETC. If you want to turn your shares into gold, you have to sell them to a willing buyer and use the proceeds to buy gold somewhere else. That’s not what Xetra promised at all.

What about those promises of full gold backing? Nobody is quite sure how Xetra and Deutsche Bank are justifying their failure to deliver gold, but the likely culprit is a clause in investor contracts that allows Xetra to modify its terms as the need arises. Many contracts include such boilerplate, and many people ignore it precisely because it is boilerplate.

The problem is that any contract that allows one party to alter the terms at will means that the other party has no real rights of ownership. In this case, Xetra investors don’t have gold in their possession, but neither do they have an enforceable right to convert their shares into the metal.

Possession Is 9/10 of the Law

The speculation about Xetra is predictable. Deutsche Bank has probably raided its gold holdings in its scramble to remain solvent. And there’s nothing any Xetra investor can do about it, since they never really owned any gold in the first place — just a piece of paper.

If you want the protection that ownership of real gold bullion provides, you need to own it yourself and store it in your own name. You may pay a bit more in spreads and fees, but if you’re owning gold as a hedge against financial calamity, that shouldn’t matter.

The upside of avoiding massive loss far outweighs the extra cost of being a real owner of gold … not of a worthless piece of paper.

Kind regards,
Do You Really Own Your Gold?
Ted Bauman
Editor, The Bauman Letter

http://thesovereigninvestor.com/


| Digg This Article
 -- Published: Tuesday, 27 September 2016 | E-Mail  | Print  | Source: GoldSeek.com

comments powered by Disqus



 



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

 news.goldseek.com >> Story

E-mail Page  | Print  | Disclaimer 


© 1995 - 2019



GoldSeek.com Supports Kiva.org

© GoldSeek.com, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on GoldSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer


Map

The views contained here may not represent the views of GoldSeek.com, Gold Seek LLC, its affiliates or advertisers. GoldSeek.com, Gold Seek LLC makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of GoldSeek.com, Gold Seek LLC, is strictly prohibited. In no event shall GoldSeek.com, Gold Seek LLC or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.