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Tag: London Gold Market

  • Citigroup to Enter London Gold Market With Heathrow Vault Partnership as Bullion Boom Drives Clearing Expansion

    Citigroup to Enter London Gold Market With Heathrow Vault Partnership as Bullion Boom Drives Clearing Expansion

    Citigroup is preparing to join the exclusive club of banks at the centre of the world’s largest gold-trading hub, partnering with secure logistics firm Malca-Amit to use its vault near London’s Heathrow Airport as the bank moves toward becoming a clearing member of the London bullion market.

    The move would see Citigroup become only the fifth clearing member of the London market, joining JPMorgan Chase, ICBC Standard Bank, HSBC and UBS Group — a group whose numbers have dwindled in recent years even as the market’s importance has grown. Clearing members occupy a pivotal role in the London market, settling tens of billions of dollars in transactions every day in a city where more than $1 trillion in gold is held in storage. Vaulting capacity is central to that function, allowing precious metals to physically change hands to settle contracts.

    Malca-Amit’s facility near Heathrow — bullion vaults are typically located close to airports to facilitate the swift movement of metal by air — was described in a 2012 profile as capable of holding more than 300 tonnes of gold and 1,000 tonnes of silver. At current prices, 300 tonnes of gold would be worth approximately $43 billion.

    Citigroup’s approach of contracting with an external custodian mirrors the model used by UBS, which also relies on a third-party vaulting arrangement rather than operating its own facility. By contrast, JPMorgan and HSBC both maintain their own London vaults, while ICBC Standard Bank acquired Barclays’ London facility in 2016. JPMorgan’s vault in the City of London is among the largest gold stores in the world, holding close to 1,000 tonnes on behalf of a single bullion-backed exchange traded fund — a holding worth roughly $136 billion.

    The timing of Citigroup’s expansion into the market reflects a broader surge in investor appetite for gold. Bullion prices have risen approximately 45% over the past year, significantly boosting revenues from vaulting services, which are typically calculated as a percentage of the value of gold stored. Citigroup and JPMorgan declined to comment on the matter. Malca-Amit did not respond to a request for comment.

  • HSBC takes stab at using blockchain to modernize London’s antiquated gold market

    HSBC takes stab at using blockchain to modernize London’s antiquated gold market

    One of the world’s top bullion banks is bringing blockchain to the antiquated London gold market.

    HSBC Holdings Plc has launched a platform that uses distributed ledger technology to tokenize ownership of physical gold held in its London vault, Mark Williamson, global head of FX and commodities partnerships and propositions, said in an interview. The new system creates digital tokens that represent gold bars, which can then be traded through the bank’s single-dealer platform.

    HSBC isn’t the first to attempt using blockchain to simplify gold investing. Crypto startup Paxos in 2016 teamed up with Euroclear to build a blockchain-based settlement service for trades on the London bullion market. But the firms dissolved the partnership the following year. Paxos still offers a digital token backed by phyisical gold, called Pax Gold, which has a total market value of $479 million, according to CoinGecko.

    What sets HSBC apart is its clout in the bullion market. It is one of the world’s largest custodians of precious metals and one of four clearers on the London gold market, where over $30 billion of the metal changes hands every day.

    Around 698,000 gold bars are stored in vaults in the Greater London area, valued at around $525 billion, according to the London Bullion Market Association. Despite its vast size, London’s gold market still relies heavily on manual record keeping and trades entirely over-the-counter.

    Using blockchain technology makes the process “quicker and less cumbersome” as clients can more easily track the gold they own through the platform, down to the serial number of each bar, Williamson said. HSBC plans to eventually expand its system to include other precious metals, he added.

    One token on HSBC’s new system is equivalent to 0.001 troy ounce, compared with 400 troy ounces for a London gold bar, the bank said in a statement. The system could in the future be used to allow direct investment in physical gold by retail investors, if local regulations where they are based permit, it said. The initial focus will be on institutional investors, Williamson said.

    HSBC’s gold system is part of a wider drive by the bank to use blockchain technology, which includes an existing platform for issuing and storing assets like digital bonds called HSBC Orion.

    Over the past year, other several large financial institutions including JPMorgan Chase & Co., Euroclear and Goldman Sachs Group Inc. have commercialized blockchain-based applications, marking an acceleration of sorts for deployment of distributed ledgers in mainstream finance. It remains to be seen whether these new platforms and applications will be adopted at scale by market participants, as well as whether they deliver the benefits proponents have long touted.