(March 27): Citigroup Inc plans to use a vault near London’s Heathrow Airport to store precious metals, as it seeks to join the small number of banks that provide a crucial role in the world’s biggest gold-trading hub.
The bank is partnering with secure logistics firm Malca-Amit, which operates the vault, according to people familiar with the matter, who asked not to be identified as the details are private. Citigroup is in the process of becoming a clearing member of the London market as investor interest in bullion increases, Bloomberg reported in October.
Those members clear tens of billions of transactions every day in London, where more than US$1 trillion in gold is stored, offering vaulting capacity where precious metals can change hands to settle contracts. Their number has dwindled to just four banks in recent years: JPMorgan Chase & Co, ICBC Standard Bank plc, HSBC Holdings plc and UBS Group AG.
Bullion vaults are often located close to or within airports, where metal can be easily flown in or out. Malca-Amit’s site is near Heathrow Airport in west London, according to its website. A 2012 profile of the company’s high security facility described how at that time it had capacity for more than 300 tonnes of gold — an amount worth approximately US$43 billion at current prices — and 1,000 tonnes of silver.
As the largest player in precious metals, JPMorgan’s London vault is one of the biggest stores of gold in the world. The vault, located in the City of London, holds almost 1,000 tonnes of gold on behalf of just one bullion-backed exchange traded fund, an amount worth roughly US$136 billion.
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HSBC also has its own London vault, while ICBC Standard Bank purchased Barclays plc’s London facility in 2016. UBS contracts with an external custodian for its vaulting needs, just as Citigroup plans to. Revenues from vaulting — which are typically calculated as a percentage of the value of the gold stored — have jumped as prices have rallied about 45% over the past year.
Citigroup and JPMorgan declined to comment. Malca-Amit didn’t respond to a request for comment.
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