Deutsche Bank Denies Clients Their Gold

The first signs of a global gold shortage?

We learn today that one of the world’s largest banks has broken its promise to offer its clients physical gold upon demand.

Deutsche Bank is the principal bank and redemption agent behind an outfit called Xetra-Gold, a publicly traded exchange-traded commodity. It claims that “every gram of gold purchase electronically is backed by the same amount of physical gold.” It further swears that investors always enjoy “the right for physical delivery of gold.”

But apparently not…

At least one German Xetra-Gold investor recently decided to exercise his “right for physical delivery of gold” — and was told to go jump in a lake. The account executive of Deutsche Bank informed him that they’re no longer offering physical delivery for reasons of ahem… “business policy.”

What reasons might those be we can only speculate. How about they don’t have the goods? This fellow demanding his gold should have read Jim Rickards:

[Financial institutions] have created enormous volumes of “gold products” that are not gold. These are paper contracts… There is some gold somewhere in the structure, but you don’t own it — you own a share. Even the share is not physical; it’s digital.

And here’s the kicker:

If too many customers claimed physical gold at once, the bank can terminate the contract and simply provide the counterparty with cash at the closing price as of the date of termination. The customer would get a check at that closing price, but they’re not going to get the actual gold. The sponsors or the exchanges or the banks, whoever is behind it, will exercise termination clauses and you won’t actually get your gold.

These investors who want physical gold would have to cash in their shares and buy it elsewhere. And now that a large group like Deutsche Bank is refusing to satisfy its clients’ fairly limited demands for physical gold… does it suggest a much larger gold shortage?

According to Jim’s top contact in the gold industry, “Goldfinger,” gold shortages are already a reality. This fellow is head of the world’s largest gold refinery in Switzerland. And he can’t find the gold to keep up with demand. The cupboards are bare.

He recently told Jim, “I’ve got a waiting list of people who want to buy my gold, but I can’t find the gold that I need to melt it down and refine it, whether it comes from miners or existing gold bars that aren’t quite the quality the buyers want to buy.”

Maybe Deutsche Bank — and remember it’s Xetra-Gold’s redemption agent — suspended redemption because it’s been deluged with paper gold investors wanting to cash out for the genuine article? We can’t say.

But it makes sense that private German demand for gold and hard currency would be on the upswing…

TheWall Street Journal reported the other day that Germans are stocking up on home safes to hoard cash, rather than leaving it in the banks. That’s because they’re worried about being socked with negative interest rates. The Japanese have done the same thing. They’ve also been buying gold by the bushel.

Negative interest rates just aren’t following the script elites have written. People are hoarding cash and buying gold, not spending it on gewgaws to “stimulate the economy.”

The Journal reports that “Recent economic data show consumers are saving more in Germany and Japan, and in Denmark, Switzerland and Sweden, three noneurozone countries with negative rates.” It adds that “savings are at their highest since 1995, the year the Organization for Economic Cooperation and Development started collecting data on those countries.”

And the Germans prefer cash, anyway. According to a 2014 Bundesbank survey, some 80% of German retail sales are transacted in cash. That’s nearly double the U.S. rate of 46%.

And therein lies a great lesson…

Many Germans recall the Nazi and, later, East German totalitarian regimes that spied on every aspect of their lives. Cash — and hard money like physical gold and silver — have great appeal to them because it’s anonymous. It leaves no footprint.

As one German businesswoman said, “I don’t want to become completely transparent. I don’t want everyone to know whether I buy chocolate, strawberries or mangoes at the store.”

Despite the IRS, Americans have no experience with that level of government surveillance over their private finances. But if the elites have their way with negative interest rates and the banning of cash, they will soon…

Below, Jim Rickards shows you why the gold shortages hinted at above are leading to a gold “super-spike.” And how it can make savvy investors fortunes in the months and years ahead. Read on.


Brian Maher
Managing editor, The Daily Reckoning

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