The Bank of Montreal just “went there” .
According to the prospectus of the Bank’s new $500 million gold fund, the fund (which will give investors the option of withdrawing their investment in real gold) seeks to eliminate “derivatives risk as well as “’empty vault risk’ or gold bullion lending risk.
Chris Powell, GATA
Dear Friend of GATA and Gold:
A year ago February, Bank of Montreal announced plans to start a physical gold fund —
— and today the bank filed a prospectus with the U.S. Securities and Exchange Commission signifying intent to stock the fund with $500 million of gold, to denominate the shares in ounces, to vault the metal at the Royal Canadian Mint, and to give investors the option of withdrawing their investment in real metal:
The prospectus provides a few interesting and even amusing details:
— It cautions that the “official sector” is active in the gold market and can affect prices, an acknowledgment that will never make it into any reports by mainstream financial news organizations.
— The fund will not insure its assets, trusting the Royal Canadian Mint to protect them.
— The fund is structured separate from the Bank of Montreal so that its assets will not be vulnerable to claims by creditors against the bank.
— And — the amusing part — the fund seeks to eliminate “derivatives risk (i.e., the use of unallocated gold, gold certificates, exchange-traded products, derivatives, financial instruments, or any product that represents encumbered gold),” as well as “’empty vault risk’ or gold bullion lending risk (i.e., the practice of the gold custodian lending, pledging, hypothecating, re-hypothecating, or otherwise encumbering any of the investors’ underlying gold bullion).”
Imagine — a bank warning against the shady practices in the gold market of other banks. While that’s something else that will never make the mainstream financial news organizations, at least the word is getting around anyway.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.