New Gold Vaults are Housing the Massive Asian Inflows of Gold

Friday, Jul 31 2015 01:40 PM

In the latest edition of Sprott’s Thoughts, strategist David Franklin explains how gold vaults is a booming business in Asia.Recent data show that significant amounts of physical gold have been liquidated from gold ETF’s (sitting in London and Swiss vaults), melted down mainly by Swiss refineries and sent to the East. Once arrived, the gold should get a home. Based on several events in the past couple of weeks, it appears that new Asian facilities will be housing the physical gold.


Franklin writes:

This week, Malca-Amit Global Ltd., a global powerhouse in vaulting and secure transportation, opened a private vault in Shanghai with storage capacity for 2,000 metric tonnes of gold. However, besides being one of the largest vaults in Asia, it has even greater strategic value. It is located in the Shanghai Free-Trade Zone, a “testing ground for new policies” that opened in late September. Identified as a reform hub for the 21st century, the sequestered area outside of Shanghai is an experimental zone for Chinese capitalism, in a similar category as Hong Kong. Joshua Rotbart, precious metals general manager at Malca-Amit stated that, “This place can be used as a trade hub basically, so foreign banks can trade with domestic banks within this facility, saving costs and time.” Given the large quantities of gold being traded with China, a facility like the Malca-Amit Global vault provides enormous benefits to the banks trading gold in Asia.

The company has already opened vaults in several Asian trading locales and this latest facility increases its storage space significantly. Last September, the firm opened Hong Kong’s largest gold-storage facility, located on the ground floor of a building within the international airport compound, with the capacity for 1,000 metric tonnes of gold. Special facilities were also opened for up to 200 tonnes of silver in Singapore that are already 30 percent booked. These investments in Shanghai’s new free-trade zone, Singapore and Hong Kong reflect the shift in world bullion demand away from the U.S. and Europe toward Asia.

Even big banks are making use of the new vaults. Banks like ANZ, JPMorgan Chase & Co., UBS AG and Deutsche Bank AG are making use of a facility which was built in Singapore some years ago. The new facility is located at the Singapore FreePort, and houses significant stores of metal.

In additiona, the headquarters of Chase Manhattan bank (JP Morgan Chase), and its underground facilities with the world’s largest bank vault, were sold to a Chinese conglomerate. The purchasers were an investment arm of China’s biggest closely held industrial group; they paid a staggering $725 million for the facility. “The news that a Chinese company is to buy the largest commercial gold vault in the US is yet another reflection of China’s enthusiasm for stockpiling gold.”

Vault space was limited around the world, last year as most bullion-dealing banks doubled their vaulting fees. These new facilities in Asia further reflect the enormous increase in the physical precious metals trade and a requirement for secure storage. With these new vaults located in Asia (or now owned by Asians) it would appear the massive amounts of gold being shipped East will not see the inside of a London or Swiss vault ever again.