Following reports about Deutsche Bank's failure to deliver physical Gold to its customers requested by Germany's Xetra-Gold service company, investors begin to question is Deutsche Bank bankrupt?
3 September, AtoZForex – Investors are concerned about the state of Deutsche Bank. Worrying reports have emerged recently stating that Deutsche Bank was unable to satisfy a physical gold delivery requests by a client of Germany's Xetra-Gold service.
The publicly traded Gold services company allows investors to participate in the gold market. Xetra-Gold is an Exchange-Traded Commodity which represents that "every gram of gold purchase electronically is backed by the same amount of physical gold."
The company promises that, “investors always have the possibility of demanding delivery of the securitised amount of gold per bearer note against the issuer… The issuer will also have delivery rights of gold from Umicore AG & Co. KG, as the gold leaf debtor.”
And yes, Deutsche Bank is its principal bank, involved as the fund's Designated Sponsor.
Since the beginning of the year, business for Xetra-Gold was good. The precious metal held by Deutsche Borse Commodities, another branch for physically backing the Xetra-Gold bond, has risen 50% to a new record high of 90.67 tons.
But when clients of Deutsche Bank wanted to convert their Xetra-Gold digital holdings into physical gold, suddenly that was not possible.
Is Deutsche Bank bankrupt? Failure to deliver physical Gold
As one of the designated sponsors, Deutsche Bank fulfills claims to deliver physical gold certified by Xetra-Gold. The bank explains reasons for the failure to deliver physical Gold:
“Should an investor’s request for the handover of physical gold not have been complied with immediately in individual cases, this will be reviewed and an individual solution will be found with the client.”
Deutsche Bank further explained to a customer that delivery of physical gold was not possible for “reasons of Business Policy.”
Such developments ignite questions is Deutsche Bank bankrupt. Unfortunately, the whole situation is similar to the great financial crisis when banks in the US were “too big to fail.” We could expected the German government not to let Deutsche Bank get bankrupt for the cost of the country's tax payers.
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