When was the last time you heard about a big Western bank investing in the future of the gold trade by building a massive new vault to house the loot? Answer: not lately.
More likely, you’ve heard about those same Western banks selling off those vaults to the new big player in the global gold market: China.
That’s the news that hit Monday when ICBC Standard Bank Plc, the worlds largest bank by assets, announced that it is buying one of the biggest gold vaults in Europe from Barclays Plc. ICBC, not incidentally, just won a role in determining prices as part of the London Bullion Market Association.
Bank to expand gold services: The London vault, which can hold up to 2,000 tons of precious metals, or about $90 billion worth of gold, was only just opened in 2012 in a secret location.
This enables us to better execute on our strategy to become one of the largest Chinese banks in the precious metals market, said ICBC commodities executive Mark Buncombe. The acquisition of a precious metals vault allows us to expand our services in clearing and processing.
The London Guardian described the vault in a report on the sale: Its security precautions reportedly include: a front door that can withstand a direct hit from a rocket-propelled grenade; an electrified roof; and plinths that have been sunk to keep out anyone ambitious enough to try to tunnel in.
ICBC had sought Deutsche Bank vault: ICBC had reportedly bought the lease to Deutsche Banks massive London gold vault back in January, but that deal is said to have fallen through. The purchase from Barclays now fills that slot.
ICBC’s vault purchase comes on the heels of its new collaboration with the Hong Kong Gold and Silver Exchange Society. The partners are reportedly planning to build the biggest gold vault in the world and establish a trading hub that would link Hong Kong, Macau, Qianhai, and Shenzhen.
The acquisition of the Barclays vault is more concrete evidence that China is aiming for a tighter grip on the West’s gold-trading epicenter of London while also expanding its domestic trade via ambitious new plans such as its yuan-denominated gold-pricing fix on the Shanghai Gold Exchange.
China dominates in terms of actual physical gold trading, CNN confirmed. Gold imports to China have surged over 700% since 2010, and the country overtook India to become the worlds biggest gold consumer in 2013.
With the West busy trading paper and electronic representations of gold (such as ETFs, futures, and options), China is busy working to corner the market on physical gold. Get your physical metal while you still can.