The article “From Good Delivery bars to Kilobars – The Swiss Refineries, the GFMS data, and the LBMA” examined the mountain of evidence concerning the known Swiss conversion of Good Delivery bars into kilobars for export to gold markets in the East. As a further step in this process, it’s worth taking a look at the substantial evidence of these kilobars either being accumulated, or passing through, vault locations in markets such as the Hong Kong gold market. It’s also worth looking at where these gold vaults in Hong are actually located.
Kilobar Accumulation in Hong Kong
In March 2015, the CME Group launched a Hong Kong based gold kilo futures contract. This contract is physically deliverable at various Hong Kong precious metals vaults. Note that most of the trades on this contract are executed OTC through CME appointed market makers, so will not appear as exchange trading volume in CME market data statistics. CME announced a market maker program on 8 January 2015 whereby “Participants must quote continuous two-sided markets in the applicable Product, at predetermined average bid/ask spreads and minimum quote sizes”, the product being the “Gold Kilo (“GCK”) futures that are traded on the CME Globex Platform.” On 16 April 2015, CME modified its market maker program, by increasing the number of designated market makers from 10 to 12.
CME Vault Inventory Analysis
As part of the 2014 pre-launch operational procedures for the CME’s Hong Kong gold contract, the CME analysed the vault inventories of the storage companies that were interested in having their vaults approved, and the CME then submitted various documents to its commodities regulator, the US CFTC.
On 11 September 2014, Brink’s Global Services, USA, Inc, HKIA Precious Metals Depository Limited, and Via Mat Management AG all applied for vault approval for the CME Hong Kong kilobar gold contract (see official CME notice here). Note that HKIA is an abbreviation for Hong Kong International Airport. Three months later on 11 December 2014, CME issued a notice that Malca-Amit had also applied for vault approval for the Hong Kong kilobar gold futures contract (see official CME notice here). On 6 January 2015, CME approved both the Brinks and the Malca-Amit vault applications for the kilobar contract (see exhibits 1 and 2 here), but the HKIA and Via Mat applications, at that time, remained unprocessed (or unapproved).
As part of the CME/CFTC due diligence on the Brinks and Malca-Amit vaults and the estimation of position limits for the gold kilo contract, Brinks and Malca-Amit provided historic monthly gold bar volumes data to CME sometime in the fourth quarter of 2014 so that CME could gauge eligible (kilobar) inventory levels (or deliverable supply) .
On 8 January 2015, the CME published a file containing Brinks and Malca-Amit historical bar volumes up to November 2014. What the file shows, in the ‘Analysis of Deliverable Supply‘ section (pages 16-19 of the pdf) is that both Malca-Amit Hong Kong vault and Brinks Hong Kong vault were storing increasingly large quantities of gold kilobars throughout the second half of 2013 and into 2014, with Malca-Amit storing up to 110 tonnes of kilobars in November 2014, the final month of the dataset.
At the same point in time, Brinks in Hong Kong was storing 49,000 kilobars, i.e. 49 tonnes. The Malca-Amit monthly data sequence commenced in June 2012, while the Brinks data was provided from January 2011 onwards. So with these two datasets we have a window of transparency into the Brinks and Malca-Amit Hong Kong kilobar holdings for the years 2011 – 2014.
As the CME report stated:
“Malca-Amit has provided average monthly inventory levels of gold kilo bars from June 2012 through November 2014. Brinks, Inc. has provided average monthly inventory levels of gold kilo bars from January 2011 through November 2014.”
Since this data is average monthly inventory, if there were regular arrivals and withdrawals of kilobar stocks throughout the monthly periods being measured (as can be seen with the Brinks Hong Kong vault stocks after the CME contract was launched in March 2015), then the average data could have, to some extent, understated the daily activity of kilobar movements in these vaults.
In its analysis the CME reported that:
“Gold kilo bar inventory at Malca Amit are all minimum .9999 fineness. Brinks, Inc. inventory consists of gold kilo bars of both .9999 and .995 fineness. Of total inventory at Brinks, Inc., the gold kilo bars of .9999 fineness comprise 90% to 95% of total inventory“
“All gold kilo bar inventory at Malca Amit and Brinks, Inc. are of brands listed as accredited refiners on LBMA and are acceptable for delivery against the Gold Kilo futures contract.”
Added to the above, another window of transparency into the Hong Kong kilobar market opened up when the CME gold kilobar contract was launched in March 2015 (see below).
Bron Suchecki of the Perth Mint has written a detailed and informative analysis of this Malca-Amit and Brinks Hong Kong 2011-2014 data as reported by the CME, for those who wish to read more on this subject.
On 13 March 2015, CME announced that it had approved an application by G4S International Logistics (Hong Kong) to be a carrier for the CME gold kilo contract in Hong Kong. Note that this approval to be a carrier (a secure transporter) is not the same as vault/facility approval. Brinks and Malca-Amit were already, at that time, approved carriers for the CME’s gold kilo contract.
When the CME Hong Kong kilobar contract was launched in March 2015, the huge 110 tonnes of kilobar holdings at Malca-Amit’s Hong Kong vault that had been held there at the end of 2014 had mysteriously dropped to approximately 1 tonne. See CME warehouse report, dated 20 March 2015 for the Hong Kong gold kilo contract. This 110+ tonnes of kilobars in the Malca-Amit vault prior to the end of 2014 could in theory have been moved to the HKIA vault since both vaults are located adjacent to the Hong Kong International Airport. Another possibility is that these kilobars were transported back to the London market so as to arbitrage kilobar premiums.
However, when the CME kilo gold futures contract was launched in March 2015, the amount of kilobar gold at the Brinks facility in Hong Kong remained high, at over 23 tonnes of kilobars in mid-March 2015.
Notice that at launch time in March 2015, only Brinks and Malca-Amit were listed on the above CME warehouse report. This is because the HKIA Precious Metals Depository and Via Mat vaults hadn’t been approved. HKIA was never approved because it withdrew its application (see 3 June 2015 CME official notice that CME had approved the application withdrawal of HKIA).
On 12 June, the CME announced that the Via Mat vault (which by then had changed name to Loomis after the Loomis acquisition of Via Mat) was approved for use by the CME gold kilo contract. Via Mat/Loomis then began appearing on the daily CME report alongside Brinks and Malca-Amit. However, since the inception of the contract, there has been very little kilobar gold reported in any of the Hong Kong vaults except for Brinks.
The below report of CME eligible Hong Kong gold kilo warehouse stocks as of 6 April 2016 shows that the Brinks Hong Kong vault facilities still hold by far the most kilobars out of the three reported facilities. The CME kilobar gold stocks can be viewed daily at this link, although the spreadsheet at the link changes daily, but retains the same spreadsheet name. For example, there were 31.14 tonnes of gold kilobars in the Brinks Hong Kong vault on 6 April.
While the daily vault report almost always shows a lot of kilobars coming into and being withdrawn from the Brinks vault, what is not clear from the daily CME Hong Kong vaults report, but which is clear from tracking the accumulated flows since the inception of the contract, is that a massive 1,121 tonnes of gold kilobars have passed through the Brinks Hong Kong vault since the inception of the CME gold kilo contract in March 2015. This movement is perfectly illustrated in the following startling chart from Nick Laird of Sharelynx who keeps track of this Brinks Hong Kong activity.
In just over 12 months, more than one-third of annual gold mine supply has passed through the Brinks Hong Kong gold vault facilities in the form of gold kilobars. This, I would argue, makes looking at the CME New York COMEX vault reports a side-show exercise compared to where the real physical gold is flowing through.
With such a high ‘churn’ rate of gold arriving into the Brinks Hong Kong vault and then leaving again, this vault must be primarily a distribution vault and not a long-term storage vault.
Notice in the following chart how eligible gold inventory, in the form of gold kilobars, has remained at a fairly static and low-level in the Loomis (Via Mat) Hong Kong warehouse for the last 9 months. Loomis only began reporting its eligible gold kilobar inventory in mid-June 2015.
Notice in the following Malca-Amit eligible inventory chart, the dramatic disappearance of over 100 tonnes of gold sometime between the end of December 2015, and March 2015, and the very low and static eligible inventory since then.
It seems very odd that the volume of kilobar gold held in Malca-Amit’s Hong Kong vault facility dropped dramatically to 1 tonne between the end of 2014 and early 2015. After all, Malca-Amit applied to the CME to have its Hong Kong vault facility approved to be ‘regular for delivery‘ for the kilobar contracts, and furthermore, Malca-Amit’s vaults in Hong Kong have a gold storage capacity of 1000 tonnes, and furthermore, the kilobar, which would show up in eligible holdings, is the gold bar size of choice for the Asian markets.
According to the CME Group, a depository, such as Malca-Amit, is required to report inventory on the ‘facility’ that is ‘regular for delivery’ with the Exchange, and not just report the inventory in one or another of the vaults in that facility. Malca-Amit has 5 vaults in its Hong Kong facility (see below).
The CME told me:
Each Depository is required to report inventory for each one of its facilities that is regular for delivery with the Exchange. Further information on obligations of metal service providers can be found in Rule 703 in Chapter 7 of the NYMEX Rulebook at http://www.cmegroup.com/rulebook/NYMEX/1/7.pdf.
The Malca-Amit Vault Facility in Hong Kong
A Bloomberg article about the Malca-Amit vault facility, “Hong Kong’s Largest Bullion Vault Signals Rising Asia Wealth“, dated 26 July 2012, stated that:
“Hong Kong’s largest gold-storage facility, which can hold about 22 percent of the bullion now in Fort Knox, will open in September to meet rising demand from banks and the wealthy, according to owner Malca-Amit Global Ltd.
The facility, located on the ground floor of a building within the international airport compound, has capacity for 1,000 metric tons, said Joshua Rotbart, general manager for the Hong Kong-based company’s Malca-Amit Precious Metals unit. Two of the vaults may hold assets, including gold, for banks and financial institutions, and others will be used for diamonds, jewelry, fine art and precious metals, said Rotbart.”
A series of 12 captioned photos, taken inside Malca-Amit’s vaults on 23 July 2012, can be seen in this Getty Images photo sequence, by photographer Jerome Favre (for Bloomberg via Getty Images).
Bloomberg has an accompanying video showcasing the Malca-Amit facility, “Where Do You Hide $50 Billion of Gold in Hong Kong?“, withe the narration beginning as follows:
“This room is in a secret location in Hong Kong. We’re not able to show you the exterior of the building for security reasons. Outside it look like an ordinary warehouse. Inside its anything but ordinary.”
It turns out this ‘secret location’ is not so secret after all (and its even listed in a CME Group spreadsheet once you know the address to look for). Bloomberg’s reference to secret location therefore looks far-fetched and dramatic, and is not surprising given that Bloomberg seems to have ceased to provide independent journalism.
The first pointer as to the vault location comes from an article in the publication Security Asia, Issue 3, 2013, pages 10-11, “Hong Kong’s Cave of Wonders“, which profiles the Malca-Amit Hong Kong facility, and states:
“Construction began on Asia’s largest private secure storage facility in February 2012, at significant but undisclosed cost. Spanning two ground floor units of a Chek Lap Kok commercial building, the vault took five months to build using 264 tonnes of reinforced steel and some 600 cubic metres of cement. Essentially, the vault comprises discrete units within the original units.
This state-of–the-art facility is designed, constructed and managed by Malca-Amit and so discreet that it took Security Asia staff a while to find the entrance, to the evident amusement of observers in the control room.
In fact there are five vaults: a common vault, a diamond vault, two smaller vaults for the use of major financial institutions, and a vault specifically designed for storing fine arts and collectibles. The fine art vault is a first for Hong Kong we are told, as it combines full vault security with climate control and FM 200 fire suppression.
Each vault has a colour-coded floor for instant recognition by CCTV operatives in the control room. Security levels escalate as we approach the vault area, with dual and triple access control systems in place.”
The Security Asia article therefore confirms that the vault facility is located in a commercial building in Chek Lap Kok. Chek Lap Kok is the redeveloped island, just north of Lantau Island, where Hong Kong’s International airport is located, hence the reference by Bloomberg to the vault being “located on the ground floor of a building within the international airport compound.”
A quick Google search for [“Chek Lap Kok” and “Malca Amit”] yields a document on the web site of CBRE, the commercial real estate company, which lists the Malca Amit vault address as G30-31, Airport Freight Forward Centre, Check Lap Kok:
Therefore, in October 2011, Malca Amit Far East Ltd entered a new lease for 24,339 sq ft of space for units G30 and G31 at the Airport Freight Forward Centre. Construction on the facility then began in February 2012 (see above).
The Airport Freight Forward Centre (AFFC) is a huge three-floor warehousing facility owned by Sun Hung Kai Properties. Apart from some of the air-side warehousing terminals in the actual airport precinct, the AFFC is the only major warehouse complex in the area. The tenant list of the AFFC even lists Malca Amit Far East Ltd, so again, Bloomberg’s reference to a secret location seems to be for dramatic effect only.
The plan of the ground floor of the AFFC warehouse can be seen here, which reveals that units 30 and 31 are self-contained and distinct from the other units on the ground floor, and are adjacent to the warehouse’s truck ramp.
Therefore, this vast Malca Amit facility at the AFFC, that’s approved by the CME as ‘regular for delivery’ for the gold kilobar contract, only holds just over 1 tonne of gold kilobars, and according to the CME’s daily gold kilobar stocks report, since March 2015, the Malca Amit facility has seen very little throughput (deposits or withdrawals) of gold kilobars. Again, in my view, it is very odd, that the largest gold vaulting facility in Hong Kong reports such low gold kilobar activity.
In Hong Kong, Malca-Amit Far East Ltd uses a company called Security Associates Asset Protection Ltd to operate its drivers/security crew for the Chep Lap Kok vault.
Because Malca Amit’s Hong Kong vault is approved for delivery of the CME group’s Hong Kong kilo gold futures contract, the vault address is also listed in one of the CME’s spreadsheet’s, which is on the CME site here.
That CME spreadsheet also lists the approved Brinks vaulting facility address in Hong Kong, which is located as Kwai Chung Container Terminal.
The Brinks Vault Facility in Hong Kong
The Brinks vault facility is located at Unit 1022W, 1/F, ATL Logistics Centre AC, Kwai Chung Container Terminal, Berth No.3, Kwai Chung. So this is the vault through which more than 1100 tonnes of gold has passed through between March 2015, and April 2016. The ATL Logistics Centre is a huge warehousing complex owned by DP World and the Goodman Group.
A brochure of the ATL Logistics Centre can be seen here. Note that the former precious metals refinery of Johnson Matthey was in Kwai Chung. This refinery facility was acquired by Metalor Technologies (Hong Kong) Ltd in 2007, and Metalor now operates its refinery there. Johnson Matthey Hong Kong had been operating its refinery in Kwai Chung since 1992.
There are also some other sources confirming that the Brinks vault is in the ATL Logistics Centre. A South China Morning Post article from March 2010, titled “Guard admits stealing HK$1m worth of gold from Brink’s vault“, stated that:
“A security guard has admitted to stealing HK$1 million worth of gold owned by HSBC from a vault holding gold worth more than HK$77 million at the Kwai Chung Container Terminals.”
“The vault, at Terminal Three, belongs to Brink’s Hong Kong..”
A Wikileaks cable, dated 15 September 2006, and titled “EXTRANCHECK: PRE-LICENSE CHECK: BRINK’S HONG KONG LIMITED“, also confirms the Brinks address :
“As per reftel A request and at the direction of the Office of Enforcement Analysis (OEA) of the USDOC Bureau of Industry and Security (BIS), Export Control Officer Philip Ankel (ECO), conducted a pre-license check at Brink’s Hong Kong Limited, 1022W First Floor, Kwai Chung Container Terminal 3, New Territories, Hong Kong (Brink’s Hong Kong). The purpose of the visit was to determine the suitability of Brink’s Hong Kong to be the recipient of 28 tactical police riot helmets and 100 harnesses/chin straps that are the subject of export license application D362247.”
The Loomis (Via Mat) Vault Facility in Hong Kong
The Loomis International (HK) Ltd (formerly Via Mat) is located at Unit 701 Global Gateway, 168 Yeung Uk Road, Tsuen Wan, Hong Kong, just a few minutes drive north of Brinks vault.
Global Gateway is another huge multi-story logistics warehouse that trucks drive into via a circular ramp.
The Loomis warehouse is on the 7th Floor of Global Gateway, beside the truck ramp.
A video of Level 7 of Global Gateway can be seen here:
Global Gateway, Level 7, docking bays:
And a Loomis armoured van exiting unit 701:
Security Bureau List
All 3 of these secure vault addresses can also be seen on the Hong Kong Government’s Security Bureau website in a “List of licensed security companies engaged in Type II security work” that are members of the Security and Guarding Services Industry Authority (SGSIA).
- Brinks at the ATL Logistics Centre in Kwai Chung
- Malca-amit at the AFFC in Chep Lap Kok
- Loomis at Global Gateway in Tsuen Wan
A G4S Vault Facility in Hong Kong
This SGSIA list also shows an address for G4S Cash Solutions (Hong Long) Limited of Securicor Centre, 418 Castle Peak Road, Cheung Sha Wan, Kowloon. Recall that G4S International Logistics (Hong Kong) is a CME Group approved carrier for the CME kilobar gold contract, but not a CME approved storage facility(vault). Looking at this Securicor Centre, 418 Castle Peak Road address in StreetView, it conveniently shows a G4S armoured van exiting a secure gated entrance on to Castle Park Road, right beside the main entrance to the Securicor Centre. Note that Securicor merged with Group 4 in 2004 to form G4S. So possibily G4S has a precious metals storage area in this Castle Peak Road facility. This would have precedent, since G4S Cash Solutions (UK) Ltd is the entity that operates the G4S precious metals vault facility at Park Royal in London, which was previously leased by Deustche Bank and is now leased by ICBC Standard Bank.
The HKIA Precious Metals Depository Limited
HKIA Precious Metals Depository Limited is a fully owned subsidiary of the Airport Authority of Hong Kong, which is itself owned by the Hong Kong SAR Government. The HKIA Depository vault is a 340-square-metre facility located ‘airside’, within the grounds of Hong Kong International Airport. Therefore, there are 2 precious metals vaults in and around Hong Kong Airport, the HKIA Depository, and the Malca -Amit vaults at the AFFC.
A 340 sq metre space (3660 sq feet) is quite a small facility, and this, along with the HKIA facility’s location adjacent to the runways, would suggest that it is a transit vault for inbound and outbound precious metals freight, i.e. high throughput.
According to a 2012 LBMA Alchemist article, HKIA also claims to be a long-term storage vault, as well as a transit vault:
“Since it started offering its services three years ago, the Hong Kong International Airport Precious Metals Depository has focused on providing both long-term and transit storage for LBMA good delivery bars, as well as tael bars that are used in local delivery in the Hong Kong gold market. Silver and other types of precious metals have also been stored at the facility. For LBMA good delivery bars in particular, but also for other precious metals, the Depository has served not only as a storage vault, but also as a physical settlement and delivery venue for traders from around the world.”
The Chinese Gold and Silver Exchange Society, which operates Hong Kong’s Chinese Gold and Silver Exchange (CGSE), also planned to utilise the HKIA precious metals vault since according to a May 2013 press release (CGSE statement May 2013) from the CGSE’s president, Haywood Cheung:
“our Exchange (CGSE) will set up gold and silver vaults at the Hong Kong International Airport and VIAMAT, a professional warehousing and logistics company.”
And at least one Hong Kong based ETF, the Value Gold ETF, uses the HKIA vault as custodian. This ETF is very small and only holds 2,224.78 kgs as of 7 April 2016. the Value Gold ETF gold bar list can be viewed in a link at the bottom right corner of this page, and contains a lot a majority of Heraeus (HK) and Metalor (HK) bars as well as some Perth Mint bars.
The South China Morning Post also reported that the Hong Kong Monetary Authority has stored its gold at the HKIA vault since 2009.
“The Hong Kong Monetary Authority brought all its gold home in 2009 and stored it at the airport depository when the facility came on stream.”
“The city’s ‘Fort Knox’ opened in 2009 at the Chek Lap Kok airport. The 340 square metre depository has double security doors and bulletproof steel walls. After its opening, the HKMA shifted its entire gold reserve – the amount has never been specified – back from London.”
At he end of 2008, the Hong Kong Monetary Authority had a relatively small amount of gold, just over 2 tonnes, specifically, 66,798 ounces of gold.
A relatively over-the-top article from May 2010 about the HKIA vault said that:
“At the airport there is a little-known labyrinth of halls, equipped with state-of-the art security cameras and patrolled by heavily armed guards
In a hi-tech treasure vault are billions of dollars worth of gold bullion, gold bars, silver and platinum. They are securely sealed off behind the thick steel doors of the Hong Kong International Airport Precious Metals Depository.”
Finally, where is the Hong Kong Airport Authority’s Precious Metals Depository building. In December 2015, I asked HKIA (firstname.lastname@example.org) where its HKIA Despository vault is located, however, HKIA, probably not surprisingly, did not reply to my email. Given that the HKIA vault location is apparently such a secret (and is not listed in any publicly accessible documentation), some speculation is allowed.
My feeling is that the HKIA Depository is not in a “little-known labyrinth of halls”, but is in one of the buildings in the restricted area down near Cheong Yip Road, past the Regal Airport Hotel, near a building which is the headquarters of Aviation Security Company Limited. Hong Kong airport’s main security company “Aviation Security Company Limited“, provides practically all the security at Hong Kong International Airport. Its address is “1 Cheong Yip Road, Hong Kong International Airport”. At the end of this road is the beginning of a restricted area of a series of silver/grey coloured buildings which are ‘airside’, right beside the runways, and are boarded by North Perimeter Road, Cheong Tat Road and Cheong Yip Road. There are various road entrances to this area, all of which are ‘restricted’.