VAULTS ARE BOOMING ! ( IN ASIA ) / SPROTT ASSET MANAGEMENT

Vaults are Booming! (in Asia)

David Franklin

Wednesday, November 13, 2013


For the better part of the last century, Switzerland has been a sanctuary for high-net-worth capital. Today, however, the rich are choosing a different destination to stash their wealth – Asia. Gold, silver and collectibles are pouring into Singapore, Hong Kong and Shanghai, jurisdictions that now offer some of the most exclusive gold and silver vault options in the world.

With the recent wealth explosion in Asia, these clients are preferring to keep their collectibles and bullion close at hand. Recently published trade data supports our presumption that a significant amount of physical gold from ETF liquidations was indeed heading East. But where to exactly once it arrived? Several transactions have taken place this month which confirm the new Asian facilities as the final destination for the physical gold that has been transferred out of London and Swiss vaults.

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.1 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.2 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.

The big banks are getting involved too. A facility built a few years ago in Singapore provides ANZ, JPMorgan Chase & Co., UBS AG and Deutsche Bank AG with gold-storage services in Singapore, as the city hopes to take advantage of the bullion trade in the region. The new facility is sited at the Singapore FreePort, and can hold significant stores of metal.3

In a stunning transaction announced in October, a Chinese conglomerate purchased the headquarters of Chase Manhattan bank (JP Morgan Chase), and its underground facilities that include the world’s largest bank vault! Chase Manhattan Plaza was sold to Fosun International Ltd., the investment arm of China’s biggest closely held industrial group, for $725 million. Fosun, a conglomerate which invests in properties, pharmaceuticals and steel, is buying the 60-storey, 2.2 million square-foot, lower Manhattan tower, according to a statement it filed with Hong Kong’s stock exchange. 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.4

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.5 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.
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1 Massive private gold vault opens in Shanghai Free-Trade Zone.
http://www.mining.com/massive-private-gold-vault-opens-in-shanghai-free-trade-zone/
2 Singapore silver vault set to meet strong Asian demand.
http://www.reuters.com/article/2013/07/29/malcaamit-silvervault-idUSL4N0FZ10P20130729
3 ANZ Opens 50-Ton Gold Vault in Singapore as Demand Expands.
http://www.bloomberg.com/news/2013-07-31/anz-opens-50-ton-gold-vault-in-singapore-on-increasing-demand.html
4 JPMorgan Sells Chase Manhattan Plaza in NYC to China’s Fosun.
http://www.bloomberg.com/news/2013-10-18/jpmorgan-selling-chase-manhattan-plaza-in-nyc-to-china-s-fosun.html
5 Deutsche to open gold vault in London.
http://www.ft.com/intl/cms/s/0/0af6a952-71ea-11e1-90b5-00144feab49a.html#axzz2kKekG695