Wednesday, June 8, 2016

Bank of Montreal initiates final processes for their gold fund program

Last year, the Bank of Montreal (BMO) announced plans to start a new gold fund which would allow investors to partake in the buying of physical gold, while having greater protections than would normally be seen in a private vaulting company.

But unlike the GLD and SLV ETF metals funds on the American stock exchanges, this fund by BMO would easily allow clients to withdrawal their gold at any time.

And on June 7, BMO filed a prospectus with the SEC to fund the new program with $500 million in physical gold bullion, in preparation for clients and investors to begin changing their currency into precious metals.

A year ago February, Bank of Montreal announced plans to start a physical gold fund -  
http://www.reuters.com/article/us-bank-of-montreal-gold-idUSKBN0L80BQ201… 
— 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: 
http://www.sec.gov/Archives/edgar/data/927971/000121465916012033/d63160s… 
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. 
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).” - Gata via Silver Doctors
Interestingly, the Bank of Montreal is going above and beyond to ensure that investors know of the perils within the banking system that currently allows institutions to confiscate customer accounts in the event of insolvency by the bank itself, and that this new gold fund does not fall under the parameters of those bail-in procedures.  In essence, the fund is not only a signal of the importance and need for gold diversity, but that it will appeal greatly to the growing number of citizens realizing that trusting their wealth inside banks is a losing proposition.

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