Deutsche Bank is to open a new precious metals vault in London next year, joining a growing number of banks and logistics companies seeking to cash in on booming investor demand for physical gold and silver.
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Gold
The growth of exchange-traded funds backed by physical precious metals has been a boon for operators of precious metals vaults.
In London, centre of the global bullion market, vault space is running low and numerous companies are attempting to break into the market.
Gold prices have fallen 13 percent since September, trading at $1,665 a troy ounce on Monday, as investors turn away from gold amid optimism over the global economy.
But investor demand for physical metal remains strong, with ETFs now holding a record 80.3m ounces of gold worth $133 billion, according to UBS. That is more than any central bank apart from the US or Germany.
Deutsche Bank said the decision to open the new vault – which will be built and managed by G4S, the logistics company – came “in response to increased demand from the market for bullion storage facilities”.
Raymond Key, global head of metals trading at Deutsche, said it would position the bank to “quickly become a leading metals clearing and custody house”.
“We know that clients are looking to diversify where they place their physical holdings and that they value Deutsche Bank’s reliability,” he said.
Banks and logistics companies are rushing to capitalize on the vaulting boom.
Brink’s, the US logistics company, last year opened a new unit in London and is already considering building another “due to the continued demand for secure vaulting space”, according to a report by the London Bullion Market Association last summer.
Barclays Capital is planning to open a new vault in London this year while JPMorganhas reopened an old one in Manhattan and built a new one in Singapore in the past two years.
Deutsche Bank confirmed only that the new facility would be UK-based but industry executives said it would certainly be in London or the vicinity.
The UK capital is the centre of the world over-the-counter bullion market with a small group of banks trading gold located in the vaults of HSBC, JPMorgan, the Bank of England, Brink’s and Via Mat.
Most bullion-dealing banks raised vaulting fees last year, in some cases by more than double, according to clients and people familiar with the situation. This was in response to the rising price of gold and the growing shortage of space.
Fees are typically between 0.03 percent and 0.15 percent of the value of the gold held per year.