China is serious about gold and continues to expand its influence on the world gold market.
On Monday, China’s largest bank announced the purchase of one of Europe’s biggest gold vaults. Reuters reported the sale:
ICBC Standard Bank is buying Barclays’ London precious metals vault, giving the Chinese bank the capacity to store gold worth more than $80 billion in the secret location. The vault is one of the largest in Europe, with a capacity to hold 2,000 tons of gold, silver, platinum and palladium. It has been operational since 2012. ICBC Standard Bank said on Monday it has signed an agreement to buy the vaulting business and transfer the associated contracts, subject to consent. The deal is expected to complete in July.”
This is the second massive London vault ICBC Standard Bank has acquired this year. In January, it purchased the lease on Deutsche Bank’s huge London gold and silver vault.
ICBC Standard Bank’s head of commodities Mark Buncombe told Reuters the deal is part of the bank’s plan to become one of the largest Chinese banks in the precious metals market. Last week the bank announced it had joined the London clearing system for gold, silver, platinum, and palladium. It’s the first bank to be admitted to the elite group since 2005.
London being the place where a lot of the bullion is traded, especially from an institutional perspective, it makes sense for them. Some people, particularly Western buyers, might be more inclined to have their gold stored in London than have their gold stored in China.”
These recent developments are another sign that gold is shifting to the West to the East, and that Asia is becoming increasingly influential in precious metal markets.
Last summer, the Bank of China joined the twice-daily gold price fixing process run by the London Bullion Market Association (LBMA). With the bank’s inclusion, the Chinese now have a small role in directly setting the price of gold in Western markets. Around the same time, China announced the formation of its largest gold-investment fund ever: the “Silk Road Gold Fund.”
The Chinese clearly understand owning gold means economic power and they are making themselves an integral part of the world gold market at a rapid pace.
By Samuel Bryan