New Gold Rush: Vaults In High Demand As Investors' Storage Needs Surge
European companies that specialize in storing precious metals are seeing a boom in demand, this according to a report by Bloomberg.
Geopolitical uncertainty and accelerating inflation are contributing to the popularity of safe-haven assets, such as gold, which is driving the demand for high-security storage, with many firms looking to expand their capacity.
"Inflation is a key concern for many of our clients," Ross Norman, CEO of bullion dealer Sharps Pixley Ltd., which owns a gold vault near Buckingham Palace, told Bloomberg. "A safe-haven asset isn't just about what you buy-it's also about where you keep it."
Recent political shocks, such as Brexit and Donald Trump's win, as well as negative interest rates and quickening inflation, have been encouraging investors to purchase precious metals.
"I was just dealing with a customer here in Germany who got charged negative interest rates on his bank account," said the CEO of CoinInvest.com, Daniel Marburger. "That is why the client chose to get into gold and silver. That is definitely a driving factor and will lead to more sales and also more storage clients."
CoinInvest, a gold dealer based in Europe, is currently looking to build a 100 square-meter (1,076 square-foot) vault, with the capacity to store over $110 million of the precious metal.
U.K.'s largest gold refiner Baird & Co. is also opening up a new vault. The new high-security vault has steel walls and is equipped with seismometers to detect nearby digging.
"Our customers are looking to park their wealth somewhere," said CEO Tony Dobra. "They understand fluctuations in the gold price, but they're comfortable with that. They know gold's never going to go to zero."
Gold being stored at the Bank of England saw a substantial jump of 6% between the start of 2016 and February 2017, reaching about 5,067 tons. The British central bank, which has one of the largest commercial vaults, stores gold for the U.K. Treasury as well as other central banks and private firms.
Another reason for increased vault space demand is the rising flow of investment into ETFs. "Investors have been net buyers of gold ETFs in a basket tracked by Bloomberg in four of the past five quarters," the media report said.
One creative new project that attempts to make money off this boom in gold storage is being pursued by INTL FCStone Inc. The idea is to allow investors with gold in vaults to trade with one another.
The program began in February by linking 1,500 locations. Already, it has more than a hundred active customers, with over 10 tons of gold traded.
"I've been in the gold market 30 years, and suddenly, I've got people asking to be on the platform I've never even heard of," head of the company's precious metals division, Barry Canham, said. "They're coming out of the woodwork."
By Anna GolubovaFor Kitco News
Follow annagolubova
agolubova@kitco.comwww.kitco.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities,securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.  |