The importance of allocated gold bullion: the case of ABN AMRO
The ABN AMRO bank has abruptly closed all weight accounts for platinum, gold and silver bullion, leaving 2000 stunned precious metals investors with little more than thin air, where their physical gold bullion, silver bullion and platinum investment once was.
The regrettable case of the Dutch bank reaffirms the absolute necessity of fully audited, allocated gold and silver to ensure verified bullion in physical gold or silver investment.
The Dutch bank, ABN AMRO, presented customers with a short notice ultimatum: sell the platinum, gold bullion and silver bullion in your account before April 1st or the financial institution will sell it for you, with no guarantee of sourcing a fair price for the gold bullion or other precious metals.
The unfortunate, if predictable, circumstances ABN AMRO customers are facing is a cautionary example of the counterparty risk investors, often unknowingly, accept with any investment in unallocated physical gold and silver.
So, what happened at ABN AMRO?
In 2013, the ABN AMRO weight accounts were transferred to another custodian. As UBS took over from Deutsche bank as the custodian of the gold and silver bullion, investors were informed by letter that their platinum, silver and gold bullion investment would be handled in a ‘different way’. The letter included a statement that, in so many words, customers could no longer redeem gold bullion, silver bullion or platinum.
At the time, gold market analyst, Jaco Shipper, read the counterparty risk between the lines of the Dutch Bank’s hushed announcement.
Shipper observed that although “ABN Amro denominates this account in terms of weight that is valued in euro, clients can never withdraw precious metals, so this denomination is entirely meaningless.” The financial institution held no allocated gold or silver bullion, Shipper labelled the precious metals “un-unallocated,” as “the invested funds may be anywhere and likewise the gold.”
The Counterparty Risk
According to the financial analyst, customers of the Dutch Bank invest in “any upside price potential of precious metals and whereby they take on all sorts of financial counterparty risks without hedging anything at all.” Shipper foresaw the possibility of a forced sell-off risk, commenting that “nobody can be held liable if these risks materialize.”
When that risk did materialise, all counterparty risk of the investment landed square on the investors. Resulting in the forced sell-off of the, formerly, physical gold, silver and platinum by the end of the calendar month.
What can we learn from the case of ABN AMRO?
A harsh investment lesson for the ABN AMRO customers affected, serves as an important reminder for the rest of us: if a financial institution holds no allocated gold or silver, and the customer cannot redeem gold or silver, and it is the investor who takes on all counterparty risk and, ultimately, pays the price.
Let’s look at the difference between Kinesis and ABN AMRO gold and silver bullion investment.
Both Kinesis gold bullion and silver bullion are a fully audited, fully allocated gold and silver bullion investment, with the legal title remaining with the holder at all times. The result: almost no counterparty risk.
|ABN AMRO Gold Bullion
Silver Bullion investment
|Kinesis Gold Bullion
Silver Bullion Investment
|1:1 allocated with
physical gold and
redeem gold and
silver any time
legal title of
physical gold and
silver at all times
Why is Fully Allocated Gold and Silver Important?
If an investor can no longer redeem gold and silver bullion, the bullion investment becomes entirely notional, as they have no legal title to any physical gold bullion or physical silver bullion.
As we can observe with ABN AMRO, without legal title, all counterparty risk is left with the investor, with potentially disastrous financial consequences.
A fully allocated gold or silver investment is in tangible, physical gold bullion and silver bullion stored in secure bullion vaulting, with legal title remaining with the holder, minimising counterparty risk.
Kinesis Fully Allocated Gold and Silver Investment
Fully allocated physical gold bullion and physical silver bullion stored securely in the Kinesis bullion vaulting system, underpins all of the Kinesis digital currencies in circulation.
As the legal title remains with the holder at all times, Kinesis has all but eliminated the counterparty risk that could lead to the calamitous situation at the Dutch bank.
Fully Redeemable Gold and Silver Bullion
Kinesis users can redeem gold bullion and silver bullion at any time. The physical gold and silver underpinning our digital gold and silver bullion based currencies can be delivered to our customers, upon request. *subject to minimum withdrawal requirements.
Why are audits important?
Audits provide investors with the peace of mind that the exact quantity of physical gold and silver is stored safely in secure bullion vaulting, as the financial institution managing the investment states.
In the absence of fully audited gold and silver precious metals, customers are left in the dark about the quantity, quality and, as we have seen with ABN AMRO, even the existence of their physical gold and silver.
Kinesis Fully Audited Gold And Silver Bullion
All physical gold bullion and silver bullion, underpinning Kinesis digital currencies is fully audited by a global physical commodity audit and inspection specialist, Inspectorate International.
Bi-annual third-party audits reassure Kinesis users that every last gram of physical gold and silver, behind Kinesis digital currencies, is stored safely within the Kinesis bullion vaulting system.
We recently successfully passed our first of many bi-annual audits. Read up on the results here.
ABN AMRO customers are not the first to suffer the financial consequences of the counterparty risk that comes with unallocated, unredeemable and unverified gold and silver bullion investment; and they won’t be the last.
Kinesis redeemable, fully audited and allocated gold and silver bullion investment has been designed with every possible precaution to prevent Kinesis users from experiencing the distressing events that took place at ABN AMRO.