What is a 'Vault Receipt'

A vault receipt is a document frequently used as a delivery instrument or to show ownership of precious metals stored in a bank, warehouse, or depository. Also known as warrant or warehouse receipt for metals.

Breaking Down the 'Vault Receipt'

Vault receipts indicate ownership of precious metal commodities. They are also used as a way of transferring precious metal ownership, without physically moving the metal.

Vault Receipts and Futures Markets

Vault receipts simplify the process of taking delivery on a futures contract. The buyer of a precious metal futures contract is agreeing to buy a set number of ounces at the agreed price. If the buyer chooses to take delivery of the metal when the contract expires, they will pay the seller and the seller will transfer the precious metal to the buyer.

This isn't done physically, which could be very costly with shipping charges and other fees. Instead, a vault receipt is provided to the buyer. The receipt shows the location of the metals and reference numbers, the date of the receipt, the name of the owners of the metal, and any storage fees or other costs that may apply to the precious metals being left in the warehouse.

With the vault receipt, the buyer of the precious metals can then opt to keep the metals stored and pay fees associated with that, or have the metals relocated. They can also transfer ownership of the precious metals to another party via a vault receipt. The name on the vault receipt changes to the new owner.

Exchange Warehouses

Futures exchanges store precious metals in secure warehouses. All precious metals that come into the warehouse must meet specific quality standards and specifications. Precious metal refiners produce these quality bars for the exchange. Vault receipts are then issued to owners of the precious metals being brought in. The owners may be mining operations, the refiner, or other parties using the refiner to create exchange-quality precious metal bars. The vault receipt changes hands/name when there is delivery on a futures contract.

In the real world, vault receipts are typically held with the broker and the owner of the vault receipt doesn't receive a physical copy unless they specifically request one. 

For most traders, the physical metal also stays in the warehouse and is not physically removed. Removing the precious metal from the exchange warehouse means that metal can no longer be traded via futures contract because the circle of integrity for those bars has been broken. It is then up to the owner of the physical metal to store it or sell it on their own. If they wish to sell it via futures contract, after removing it from the exchange warehouse, it needs to go back through the refining process. Once the metal is back in the warehouse a vault receipt is issued once again.

RELATED TERMS
  1. Warehouse Receipt

    A warehouse receipt is a type of documentation used in the futures ...
  2. Constructive Receipt

    Constructive receipt is when cash has not been physically received, ...
  3. Warehouser's Liability Form

    A document that describes the obligations of a storage facility ...
  4. Installment Receipt

    An installment receipt is a debt or equity issuance in which ...
  5. Trust Receipt

    A trust receipt is a notice of the release of merchandise to ...
  6. Warehouse Bond

    Warehouse bonds assure anyone keeping goods in a warehouse that ...
Related Articles
  1. Investing

    Should You Add Metals To Your Portfolio? (SLV, GLD)

    This study examines how various metals have performed over the last 10+ years, with analysis of whether you should consider investing in metals.
  2. Trading

    The Fancy Way To Diversify Your Portfolio: Precious Metal Options

    A guide with strategies on how to invest or trade in precious metals by using options.
  3. Investing

    A Beginner's Guide to Precious Metals

    Since the dawn of time, gold and silver have been recognized as valuable. And even today, precious metals have their place in a savvy investor's portfolio.
  4. Investing

    Investing in the Metals Markets

    Here are the many options available for investing in the earth's chemical elements, such as gold, silver, and rare-earth metals.
  5. Investing

    Top 5 Precious Metal ETFs for 2018

    Investing in precious metals can be effective for portfolio diversification. Here are a few good places to start with ETFs.
  6. Investing

    Looking for a Vanguard Gold ETF or Mutual Fund?

    Explore a detailed analysis of the Vanguard Precious Metals and Mining Fund, and learn about its characteristics, modern portfolio statistics and suitability.
  7. Trading

    3 Charts Suggest That Now Is the Time to Buy Precious Metals

    Bullish chart patterns on these precious metal ETFs suggest that the bulls are gearing up to send prices higher.
  8. Investing

    The Top 5 Silver Equity Mutual Funds for 2016

    Discover the top five mutual funds that investors should consider adding to their portfolio in 2016 to gain exposure to silver equity.
  9. Investing

    VGPMX: Vanguard Precious Metals And Mining Fund Performance Case Study

    Discover the basic information about Vanguard Precious Metals and Mining Fund and learn about the historical performance of the fund's price.
  10. Investing

    3 Physically Backed ETFs Worth Your While (GLD, SLV)

    Learn about physically backed ETFs, what they are and how they can help provide your portfolio with pure precious metals exposure.
RELATED FAQS
  1. What are the most common ETFs that track the metals and mining sector?

    Discover investment opportunities with ETFs that invest in precious and base metals such as gold, silver, platinum, copper ... Read Answer >>
  2. What is the banking sector?

    Learn why the banking sector is a vital industry to our economy, what it does to drive the economic growth and understand ... Read Answer >>
  3. What main factors affect share prices in the metals and mining sector?

    Discover the primary factors that influence share prices of companies in the metals and mining sector and how companies can ... Read Answer >>
Trading Center