London gold traders to open vaults in transparency push
Bullion group to provide data for first time on how much gold is traded in Square Mile
London’s centuries-old gold market is to usher in an era of transparency with plans to reveal how much bullion is held in vaults in and around the city, including those controlled by the Bank of England.
The move is being led by the London Bullion Market Association, which will provide data for the first time on how much gold is traded in the Square Mile.
Some of the world’s biggest banks are trying to shift trading of the precious metal on to an exchange. By providing greater transparency and data, the LBMA, whose members include HSBC and JPMorgan, hopes to head off the challenge and persuade regulators that banks trading bullion should not have to face more onerous funding requirements.
In London most gold is traded “over-the-counter”, or directly between buyers and sellers, so there is little data on how much changes hands. Estimates from the LBMA suggest that about $26bn of gold is traded daily in the City but there are no official figures.
The LBMA plans to release the monthly vault data on a three-month lag, according to people involved in the process. It will show gold bars held by the BoE, the gold clearing banks, and those operated by the security companies such as Brink’s, which are also members of the LBMA, according to a person involved in setting up the programme. The LBMA declined to comment.
London’s vaults hold billions of dollars of gold, one of the largest stashes. Vaults owned by HSBC are used to back the largest gold exchange traded fund, the SPDR Gold Shares.
The vaults, in secret locations within the M25 orbital motorway, are normally equipped with extreme security measures such as blast doors and fingerprint sensors that detect the flow of blood to prevent the use of severed digits. Access is rarely granted to members of the public.
An estimated 400,000 large gold bars are stored at the BoE’s vaults in the City, worth some $150bn, according to the LBMA. The BoE holds the most gold because it acts as a custodian for the holdings of other central banks.
Last year a gold vault owned by Barclays, which can house $80bn of bullion, was bought by China’s ICBC Standard Bank.
Since the financial crisis, policymakers have been pushing for financial instruments to be traded on exchanges and cleared through centralised systems. Last year the London Metal Exchange and the World Gold Council announced plans for a gold futures contract backed by a consortium of banks including Goldman Sachs and ICBC.
HSBC and JPMorgan, London’s biggest bullion banks, are backing the initiatives by the LBMA to improve transparency.