Royal Canadian Mint to offer "Exchange Traded Receipts" for Gold

The Royal Canadian Mint made an interesting announcement yesterday.

The Mint is launching a Canadian Gold Reserves program within which they are offering Exchange Traded Receipts (ETRs).

These 'receipts', according to the Mint, will provide evidence of ownership in physical gold bullion held in the custody of the Mint at it's facilities in Ottawa.

Ian E. Bennett, President and CEO of the Royal Canadian Mint says:

• "We believe that this new program will build on our reputation and continued success as a world-class custodian of precious metals. With the introduction of the Canadian Gold Reserves ETR program we hope that investors will see this as a convenient, efficient and secure method for investing in and owning physical gold."

According to the Mint Press Release the purchaser of an ETR owns the actual gold rather than a unit or share in an entity that owns the gold, unlike other gold investment products.

The net proceeds of the initial offering will be used to purchase gold on behalf of the initial purchasers of ETRs at the London pm fix price on the closing date of the offering (Closing Date). Subject to certain restrictions, ETR holders will be entitled to redeem their ETRs for physical gold products in the form of 99.99%, or for cash based on the future gold price or market price of the ETRs.

Subject to market conditions, the initial offering of ETRs is targeting an issue size of approximately CAD $250 million. The issue price per ETR will be CAD $20.00 or the USD equivalent and the Per ETR Entitlement to Gold will be determined on the Closing Date and will be reduced daily by an annual service fee of 0.35 per cent. Subject to the satisfaction of certain conditions, the ETRs will be listed on the Toronto Stock Exchange and commence trading on the Closing Date. ETRs will be listed in both Canadian and U.S. dollars and may be traded in either currency.

The ETRs have not been and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States.

The precious metals community has always been highly skeptical of any arrangement where paper claims are offered in place of physical Gold in hand so it will be interesting to see how this is received.

Clearly the Royal Canadian Mint is betting on it's reputation in offering these ETR's.

It will be interesting to keep an eye on this and whether or not the Mint makes a similar offering in Silver.

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Royal Canadian Mint comments on the demand for Silver

Evening Gang. Part 4 is not ready tonight, but what a wild day for those of us who do follow silver. If you click on the image above, it will enlarge for you showing you how silver was raided today.

Why the massive drop?

Is the silver supply issue suddenly all better?

Did we suddenly discover a couple billion ounces laying around somewhere?

Did the U.S. suddenly balance its budget?

Are all of the U.S. states suddenly solvent?

Nope... it was a raid, pure and simple. Designed to drive away the massive open interest of buyers who are still standing for delivery of physical silver in March.

Today was options expiry for Silver and the Cabal launched a massive attack to drive the price down. As you can see in the graph, we went from over $33.20 down to $31.70, a huge drop of $1.50 in a very short period of time.

In any other era, this would have sent Silver cascading lower still and kept it down for months afterward. It is truly a testament to the paradigm shift we are seeing in precious metals that not only did Silver not cascade downward in price, but that it actually rebounded and, as this is written, sits at $32.52.

The Comex is facing a dilemma. And it all has to do with sourcing physical silver (more on this in Part 4 of our series).

How difficult is it to find large amounts of silver?

King World News had a great interview with David Madge, director of bullion sales at the Royal Canadian Mint.

When asked if the RCM is having trouble acquiring silver Madge responded,

• “Demand right now for silver is through the roof and it shows no signs of slowing at this point. Sourcing silver is becoming very difficult. We are competing with a great many players when it comes to purchasing silver and many of these players are bidding the price higher.”

Madge goes on to say,

• “Our advantage is that we have had long-term relationships with our suppliers and that has helped us in this situation. We have been able to leverage off of those relationships to get supply, but it still remains a big challenge sourcing material. We’re looking at ways of mitigating our risk regarding supply of silver.
  
  We are anticipating it to become even more difficult to secure supplies in the future. This is based on what we are seeing firsthand and what our suppliers are telling us. We work closely with these banks to secure silver and they tell us there is a lot of competition.”

When asked what this means for the price of silver and how long this condition is expected to persist Madge stated,

• “I think you are going to see the premiums go up in order to secure silver. At some point some players will be priced out of the market. I don’t think this is a short-term situation, I think there are a lot of issues going forward and this may be the new norm.”

So here you have the Royal Canadian Mint telling us that they expect it to become even more difficult in the future to secure supplies of silver. As King World notes, this is an extremely important testimonial regarding how tight the silver market is because the information is coming directly from the Royal Canadian Mint itself.

Although I haven't posted Part 4 (The Short Squeeze) yet, we are closing in on the cut off for March delivery for physical silver from the COMEX and open interest for the delivery of physical silver remains massively high.

As mentioned yesterday COMEX silver inventories are at 4 year lows. Total dealer inventory is now 42.16 million ounces and total customer inventory is now at 60.68 million ounces, giving a combined total of 102.847 million ounces.

Today's open interest stands at 28,000 contracts. To give you a sense of how massive that is, 28,000 contracts = 140,000,000 oz's still standing for delivery.

And if the Royal Canadian Mint is having difficulty sourcing additional silver, you know the COMEX is in a desperate position.

Tomorrow should be an interesting day indeed on the silver markets.

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