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BullionStar Presentation on Real Vision TV – Bullion Banking, ETFs & Physical Gold

BullionStar recently teamed up with Real Vision TV, the unique video-on-demand finance and investment channel, to film a presentation for the Real Vision audience on some topical areas of the gold market.

The video presentation, which was filmed in London in June 2017, covers the fractional-reserve world of bullion bank trading in the London Gold Market, and also some concerns and risks of gold-backed Exchange Traded Funds. It then wraps up by discussing the benefits and attractions of physical gold ownership in light of the dangers and risks of today’s synthetic gold trading market.

Real Vision TV has kindly made this presentation available for viewing by BullionStar customers and readers, and the video presentation, which is 20 minutes long, can be viewed at the following link:

https://player.vimeo.com/video/227901044

Ronan Manly BullionStar on Real Vision TV explains London bullion banking, ETFs and Physical Gold
Ronan Manly, BullionStar on Real Vision TV. Click to view video presentation.

BullionStar would like to thank Real Vision TV for making this presentation possible and for facilitating the broadcasting of the presentation to the BullionStar audience.

Real Vision TV, founded by Raoul Pal and Grant Williams, is a subscription-based video on-demand channel featuring discussions, interviews, presentations and insights from many of the world’s top financial market minds and investment gurus.

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How many Silver Bars are in the LBMA Vaults in London?

Sometime in the coming days, the London Bullion Market Association (LBMA) plans to begin publishing gold and silver vault holding totals covering the network of commercial precious vault operators in London that fall under its remit. This follows an announcement made by the LBMA on 8 May.

There are seven commercial vault operators (custodians) in the LBMA custodian vault network namely, HSBC, JP Morgan, Brinks, Malca Amit, ICBC Standard Bank, Loomis (formerly Viamat), and G4S. Note that ICBC Standard Bank has a vault which is operated by Brinks on behalf of ICBC Standard. It is also quite possible that some of the HSBC vaults, such as the famous GLD gold vault, are located within Brinks facilities.

Adding in the Bank of England gold vaults under the Bank of England’s head office in the City of London, the LBMA vaulting network comprises eight sets of vaults. However, the Bank of England vaults do not store silver, or at least there is no evidence that the Bank of England stores silver. However, the other 7 vault operators can and do store silver, or at least most of them do. It’s unclear whether the G4S vault stores anything on behalf of anyone, but that’s a different story.

The forthcoming LBMA vault data will represent actual physical gold and silver holdings, i.e. real tangible precious metals, as opposed to the intangible and gargantuan paper gold and paper silver trading volumes generated each day in the London precious metals markets.

The LBMA will report physical holdings data on an aggregated basis for each of gold and silver, i.e. one quantity number will be reported each month for vaulted gold, and one quantity number will be reported each month for vaulted silver. The LBMA data will be on a 3-month lagged basis. For example, if the LBMA begins reporting this data in early July (which it probably will), then the first set of data will refer to the end of March period.

The uncertainty as to when the LBMA will begin to publish its vault holdings data is purely because the LBMA has not provided a specific publication commencement date. At first, the LBMA announced that the reporting would begin “in the summer”. Subsequently, it announced that it’s vault reporting would begin in July.

As to whether the LBMA vault holdings numbers published each month will include or exclude the Bank of England gold vaults holdings is also unclear. At the end of April, the Bank of England went ahead and separately began to publish vault holdings numbers for its own gold vaults, also on a 3-month lagged basis. More information on this Bank of England initiative can be read in BullionStar blog “Bank of England releases new data on its gold vault holdings

Incidentally, the Bank of England has now updated its website (updated 30 June) with the gold holdings figure for its vaults as of the end of March, and is reporting total physical gold holdings of 163.36 million troy ounces, which equates to 5081 tonnes of gold.

When the LBMA begins to publish its numbers, it will be clear as to whether the LBMA gold number includes the Bank of England gold holdings or not, and this will probably even be specified in a footnote of the report. Excluding the Bank of England vaults (or at least the non-loaned gold in the Bank of England vaults which is not under the title of bullion banks), the remaining lion’s share of the LBMA’s gold holdings number comprises gold held by Exchange Traded Funds (ETFs) in London.

In early May, in the article “Summer of 17: LBMA Confirms Upcoming Publication of London Gold Vault Holdings”, I calculated that these gold-backed ETFs which store their gold in the LBMA vaults in London accounted for 1510 tonnes of gold. Specifically:

The HSBC vault in London holds gold on behalf of the SPDR Gold Trust (currently 853 tonnes) and ETF Securities (about 215 tonnes). The JP Morgan gold vault in London holds gold on behalf of ETFs run by iShares (about 210 tonnes in London), Deutsche Bank (95 tonnes), and Source (100 tonnes). An ABSA ETF holds about 36 tonnes of gold with Brinks in London. In total, these ETFs represent about 1510 tonnes of gold.

The approach used to calculate the gold stored by these ETFs in the London vaults can be seen in the article “Tracking the gold held in London: An update on ETF and BoE holdings”. To this 1510 tonnes gold figure we can add gold held on behalf of customers of BullionVault and GoldMoney – which is roughly 12 tonnes of gold between them (4.75 tonnes for GoldMoney, and 7.2 tonnes of gold for BullionVault).

When the LBMA publishes its first gold total for gold held in its vault network, it will also be clear as to whether the LBMA vaults hold any significant amount of physical gold above and beyond the gold allocated within the gold-backed ETFs. There may be some gold tonnage held on an allocated basis by the LBMA bullion banks as a ‘float’, and also some gold held in allocated form by various institutional investors such as hedge funds, but my hunch is that this residual gold will be at most a respectable fraction of the amount of gold stored on behalf of ETFs in London.

However, the silver holdings in the LBMA vault network are a different kettle of fish entirely, and in addition to ETF holdings (which are reported), there could be significant silver holdings in the London vaults which have gone unreported up until now (unreported silver in the form of what consultancy GFMS calls ‘Custodian Vault’ holdings).

Reported Silver

Although gold usually generates the most headlines, it’s important not to forget about silver, and the fact that this new LBMA reporting will also provide a monthly aggregated total for the amount of physical silver held in the LBMA vaulting network in London. The silver stored in these LBMA vaults is in the form of variable weight London Good Delivery silver bars.

The recommended weight range for a Good Delivery silver bar is between 900 troy ozs and 1100 troy ozs, however, these bars will often weigh in the region of about 1000 troy ounces each. The minimum purity of a London Good Delivery silver bars is 99.9% pure silver. For example, on the BullionStar website there is a Heraeus 0.999 silver bar weighing 947.75 troy ounces. This Heraeus silver bar is an example of a Good Delivery silver bar.

Since silver has a lower value to weight ratio than gold and is bulkier to store, silver a) takes up more room and b) can be stored in secure warehouses rather than ultra-high secure vaults that are used to store gold. This is particularly true in expensive cities such as London where it is more economical to store silver in locations with lower commercial rental values.

In the LBMA vaulting network, London Good Delivery silver bars are stored 30 bars per pallet, i.e. a formation of 10 bars stacked 3 bars high. Since each bar weighs approximately 1000 oz, each pallet will weigh about 30,000 ozs, i.e. each pallet would weigh about 1 tonne.

Silver bars stored on pallets
‘1000 oz’ Silver Bars – 30 bars per pallet

At this stage, can we arrive at an estimate of the minimum amount of silver currently held in the LBMA London vaulting network? The answer is yes, for the simple reason that, in a similar manner to gold-backed ETFs, a substantial number of silver-backed ETFs also hold their silver in the vaults of London-based precious metals vaulting custodians, and these ETFs publicly report their silver bar holdings.

In addition, BullionVault and GoldMoney (which are not ETFs), both hold silver with one of the custodians in the LBMA vaulting network – Loomis. But I have included the BullionVault and GoldMoney silver totals below purely because even though they are non-ETF custodian vault holdings, both companies’ silver holdings are publicly reported on their websites.

However, there is probably also a lot more additional silver held in the London vaults above and beyond the silver bars allocated to ETFs and the known silver stored by GoldMoney and BullionVault. Some of this additional silver falls under what Thomson Reuters GFMS classify as ‘Custodian Vault‘ silver, which is silver that is basically in an ‘Unreported’ category but which Thomson Reuters GFMS seems to think it knows about through its own ‘proprietary surveys’ and ‘field research’. This ‘Custodian Vault’ silver probably accounts for a substantial amount of silver in the London vaults. However, it is difficult to know because GFMS does not provide granularity on its numbers beyond an overall ‘Europe’ number. But I have made some assumptions about this ‘Custodian Vault’ silver in London, which is discussed in a final section below.

Silver ETFs

For the silver-backed ETFs, the first step is to identify which silver ETFs hold silver bars in the LBMA vaults in London. Using the list of silver ETF providers specified on Nick Laird’s GoldChartsRUs website (subscription only), the platform providers and their ETFs which hold silver in the LBMA vaults in London are as follows:

  • iShares: 1 ETF
  • ETF Securities: 6 ETFs
  • SOURCE : 1 ETF
  • Deutsche Bank: 3 ETFs

Between them, these four providers offer 11 ETFs that hold some or all of their silver in LBMA London vaults. This silver is held with custodians JP Morgan and HSBC, and with sub-custodians, Brinks and Malca Amit. Note, that GoldMoney and BullionVault store silver in London with Loomis as custodian.

As publicly traded vehicles, most of these ETFs publish daily silver bar weight lists or holdings files and they also undergo twice yearly physical audits by independent auditors. These weight lists and audits documents are helpful in pinpointing who the custodians and sub-custodians are, which locations these silver ETF’s store their silver in, and how much silver (in silver bar form) is stored in each location.

iShares Silver Trust (SLV)

The iShares Silver Trust, ticker code SLV, is the world’s largest silver-backed ETF.  It’s probably best to think of SLV as the silver equivalent of the mammoth SPDR Gold Trust (GLD).

The custodian for SLV is JP Morgan Chase Bank (London Branch), and Brinks also acts as a sub-custodian for SLV. SLV holds silver in vaults across both London and New York. According to the SLV daily silver bar weight list, SLV’s silver bars are held in two Brinks vaults in London, one JP Morgan vault in London, and one JP Morgan vault in New York.

As of 29 June 2017, SLV reported that it was holding 348,841 Good Delivery silver bars containing a total of 339.89 million troy ounces of silver, or a colossal 10,572 tonnes of silver. The actual SLV bar list, which is uploaded to a JP Morgan website in pdf format using the same filename each day, can be seen here, but be warned that the file is about 5370 pages long, so there’s no real need to open it unless you are curious. A screenshot of the top of the first page is provided below

Silver bars held in the iShares Silver |Trust (SLV), JP Morgan London custodian Morgan
Silver bars held in the iShares Silver |Trust (SLV), JP Morgan London, SLV custodian. Source: SLV weight list, JP Morgan website – Click to Enlarge

The SLV weight list specifies that the SLV silver is held in a ‘Brinks London‘ vault, a ‘Brinks London C‘ vault, a ‘JPM London V‘ vault, and a ‘JPM New York‘ vault. Between them, 2 Brinks vaults in London hold 55% of SLV’s silver bars representing 5753 tonnes, or 54% of the silver held in SLV. Adding in the ‘JPM London V‘ vault means that 289,053 silver bars, weighing 8720 tonnes (or 82% of SLV’s entire silver holdings) are held in LBMA London vaults.

iShares Silver Trust (SLV) - Silver bars and Ounces by location
iShares Silver Trust (SLV) – Silver bars and Ounces by location – Click to Enlarge

The auditor for SLV is Inspectorate. Interestingly, the latest Inspectorate letter for SLV, for record date 10 February 2017, does not make a distinction between the 2 Brinks vaults in London and just reports that SLV’s silver is in:

“Three vaults located in and around London and New York:

– two vaults owned and operated by JP Morgan Chase Bank N.A. with 124,054 bars

one vault owned and operated by Brinks, as a sub-custodian for JP Morgan Chase Bank N.A. with 220,066 bars

 This would suggest that Inspectorate does not see the need to distinguish between the “Brinks London” vault and the “Brinks London C” vault, presumably because both Brinks vaults are in the same building in the Brinks facility (which is beside Heathrow Airport).

Even though the official custodian for SLV is JP Morgan Chase Bank N.A., London Branch (see original SLV Custodian Agreement filed April 2006 here), since it’s launch in 2006 SLV has at different times used quite a diverse group of sub-custodian vaults as well as at least 3 JP Morgan vaults. For example, over the 3 year period from early 2010 to early 2013, SLV stored silver in the following vaults:

  • Johnston Matthey, Royston
  • Brinks London
  • Brinks London A
  • Brinks London C
  • Viamat (now known as Loomis)
  •  JP Morgan London A
  • JP Morgan London V
  • JP Morgan New York

Royston is about 50 miles north of central London. The above list is taken from the following chart which is from the ScrewTape Files website.

SLV vaults used, April 2013 and prior. Source: Screwtape Files
SLV vaults: Feb 2010 – April 2013. Source: Screwtape Files – Click to Enlarge

Given that there are Brinks vaults in London named ‘Brinks London‘, ‘Brinks London A‘, and ‘Brinks London C‘, this would most likely imply that there is or was also a ‘Brinks London B‘ vault, which, for whatever reason, doesn’t show up in any ETF custodian documentation.

The naming convention of the JP Morgan vaults in London as ‘JPM London A‘ and ‘JPM London V‘ is also interesting. SLV silver started being taken out of the ‘JPM London A’ vault in February 2012, and this vault was depleted of 100 million ounces of SLV silver (~ 3100 tonnes) by October 2012 (blue line in above chart). At the same time, the SLV silver inventory in the ‘Brinks London’ vault ramped up by 100 million ounces of SLV silver also between February 2012 and October 2012.

JPM London A could be JP  Morgan’s original vault in the City of London. This would then make the JPM London V vault a separate location. My pet theory (pet rock theory) is that the V in the ‘JPM London V’ could refer to Viamat International, which is now known as Loomis. JP Morgan could have outsourced storage of silver to Viamat by ring-fencing some vault space. JP Morgan could then call this space a JP Morgan vault, even though it would be physically within a location managed by one of the security storage / transport providers.

I now think on balance that HSBC probably took the same approach with its gold vault and has it located in a Brinks facility, but that it calls it a HSBC vault. This could also mean that HSBC uses Brinks to store silver, while referring to it as HSBC storage. As to whether HSBC and JP Morgan store gold at the Bank of England while labelling it as a HSBC or JP Morgan storage area is another interesting question, but is beyond the scope of discussion here.

Note, there is also an iShares Silver Bullion Fund known as SVR which uses Scotia Mocatta as a custodian, which as of 29 June held 2,154 silver bars, however, SVR mostly holds its silver bars mostly in Toronto with Scotia, with a small number of silver bars stored with Scotia in New York. SVR therefore does not store any silver bars in London. See latest SVR weight list here.

ETF Securities – 6 ETFs

Keeping track of all the silver-backed ETFs offered by ETF Securities is challenging to say the least, but in the below discussion I’ve tried to devise a system which will make things at least a little clearer.

ETF Securities operates 6 ETFs which hold physical silver bars that are stored in the LBMA precious metals vaulting network in London. Of these 6 ETFS, 3 of them hold silver bars and nothing else. The other 3 ETFs are precious metals baskets which hold ‘physical’ gold, silver, platinum and palladium. Two of these ETFs are domiciled in the UK, 2 are domiciled in Australia, and the other 2 are domiciled in the US. In each of the UK, Australia and the US, ETF Securities offers 1 silver ETF and 1 precious metals basket ETF.

It’s most convenient to refer to the codes of these ETFs when discussing them. The 2 UK domiciled ETFs, with codes PHAG (silver) and PHPM (precious metals basket), are positioned under a company called ETFS Metal Securities Limited (MSL). The 2 ETFs domiciled in Australia, with codes PMAG (silver) and PMPM (precious metals basket), fall under a company called ETFS Metal Securities Australia Limited (MSAL). The final 2, which are US domiciled, are known as SILV (silver) and GLTR (precious metals basket).

ETFS Metal Securities Limited (MSL) – PHAG and PHPM

ETFS Physical Silver (PHAG) has a primary listing on the London Stock Exchange (LSE) and trades in USD. It’s NAV is also in USD. The custodian for PHAG is HSBC Bank Plc, with a listed vault location of London. Note: There is also another variant of PHAG called PHSP. It’s the same security as PHAG (same ISIN) but its trades in GBP (and its NAV is calculated in GBP). Its best to ignore PHSP as it’s literally the same fund.

ETFS Physical PM Basket (PHPM) is a precious metals Basket ETF that also holds gold, platinum, and palladium, in addition to silver. The custodian is HSBC Bank Plc with a vault location in London. There is also a GBP variant of PHPM called PHPP. Again, just ignore PHPP in this analysis.

ETFS Metal Securities Limited (MSL) officially reports all of its precious metals holdings in the same report (which it reports on each trading day). Since PHAG and PHPM are part of MSL, PHAG and PHPM silver bar holdings are reported together. According to the MSL weight list, as of 30 June 2017, MSL held 62,427 London Good delivery silver bars containing 60,280,155 troy ounces of silver (1875 tonnes). The individual ETFs within MSL also report their own holdings. However, there is a slight mismatch between dates on the individual fund pages and the date in the MSL spreadsheet with PHAG and PHPM reporting 29 June, while MSL has reported 30 June.

It’s not a big deal though. As of 29 June, PHAG held 58,777,148 troy ozs of silver (1828.2 tonnes) and PHPM held 1,480,037 troy ozs of silver (46 tonnes), which together is 60,257,185 troy ounces of silver (1874.25 tonnes), which is very close to the MSL reported number. Overall, PHAG holds 97.5% of the silver that is held in MSL, and PHPM only holds about 2.5% of the silver held in MSL.

Now, here’s the crux. While MSL uses HSBC Bank Plc in London as custodian for its silver, HSBC also uses Malca Amit London as sub-custodian, and the Malca Amit vault holds more than twice the amount of MSL silver (i.e. predominantly PHAG silver) than the HSBC vault. MSL’s reported silver holding are distributed as per the following table:

ETF Securities -
ETF Securities PHAG and PHPM – Silver bars and Ounces by location – Click to Enlarge

MSL holds 62,427 London Good Delivery silver bars in LBMA vaults in London, containing 60.28 million ounces of silver (1875 tonnes of silver). The Malca Amit vault stores 42,917 of these bars (1283 tonnes), and a HSBC vault stores another 19,510 silver bars (592 tonnes).

Inspectorate is also the independent auditor for the silver held by MSL. According to the latest Inspectorate audit letter, dated 3 March 2017 but referring to an end audit date of 31 December 2016, the silver in MSL was held in the vaults of HSBC Bank plc, London and at the vaults of Malca-Amit London.

ETFS Metal Secs. Australia Ltd (MSAL) – PMAG  & PMPM

ETFS Physical Silver (PMAG), domiciled in Australia, is an ETF which only holds silver, and holds this silver in London with custodian HSBC Bank plc at a vault location in London. Note: ETF Securities officially refers to PMAG as ETPMAG.

ETFS Physical PM basket (PMPM) is a precious metals Basket ETF that also holds gold, platinum, and palladium, in addition to silver. The custodian of PMPM is HSBC Bank plc with a vault location in London. Note: ETF Securities officially refers to PMPM as ETPMPM.

In a similar way to UK domiciled MSL, MSAL (the ETFS Australian company) reports on all of its precious metals holdings in one daily spreadsheet including the silver in PMAG and PMPM. As of 30 June 2017, MSAL held 2754 silver bars in a HSBC vault in London, containing 2,664,690 troy ounces of silver (82.88 tonnes of silver).

Of the 2,664,690 ounces of silver held by MSAL, over 98%, or 2617,229 ounces, is held by PMAG, with less than 2% held in PMPM (47,362 ounces). The actual figures are 98.22% vs 1.78%. This means that PMAG roughly holds 2705 silver bars, and PMPM holds 49 silver bars.

Inspectorate is, not surprisingly, also the independent auditor for MSAL’s metal holdings, and as per the latest audit letter for record date 31 December 2016, the silver bars audit location is stated as having been “HSBC Bank plc, London“.

ETF Securities US domiciled ETFs: SIVR and GLTR

The final two ETF Securities ETFs which hold silver bars are the ETFS Silver Trust (SIVR), and the ETFS Precious Metals Basket Trust (GLTR). HSBC bank plc is the custodian of SIVR and JP Morgan is the custodian of GLTR. However, GLTR also uses Brinks as a sub-custodian.

The latest silver bar weight list spreadsheet for the ETFS Silver Trust (SIVR), dated 29 June, which is titled “HSBC US Silver Bar List”, states that the SIVR Trust holds 21,437 silver bars containing 20,363,315 troy ozs of silver (633.4 tonnes of silver). There is no mention of SIVR holding any of its silver with a sub-custodian. The latest independent audit report for SIRV, by Inspectorate, for an audit reference date of 31 December 2016, states that the audit took place “at the vault of HSBC Bank plc, London (the “Custodian”)“, where Inspectorate found “20,108 London Good Delivery Silver Bars with a weight of 19,171,492.300 troy ounces.

The latest silver bar weight list for the ETFS Precious Metals Basket Trust (GLTR), also dated 29 June, and which is titled “JPM Precious Metals Basket Bar List“,  states that the GLTR Trust holds 5,670 silver bars containing 5,496,035 ozs of silver (~ 171 tonnes of silver).

However, while 85% of these bars (144.5 tones of silver) are stored in the ‘JP Morgan V‘ vault, 15% of the silver bars (26.5 tonnes of silver) are stored in a ‘Brinks 2‘ vault. So according to GLTR naming convention, as there is a ‘Brinks 2’ vault, presumably when it was first named, there was also a ‘Brinks 1’. ‘Brinks 2’ could possibly be referring to the same location as the ‘Brinks London A’ vault.

GLTR
ETF Securities (GLTR) –Silver bars and Ounces by location – Click to Enlarge

Inspectorate is also the independent auditor for the precious metals held by GLTR. In the latest Inspectorate audit letter for GLTR, with an audit reference date of 31 December 2016, Inspectorate states that its audit was only conducted “at the vault of J.P. Morgan Chase N.A, London (the “Custodian”)” where it counted “4,873 London Good Delivery Silver Bars“. This probably means that GLTR’s holdings of silver bars in the ‘Brinks 2’ vault are quite recent, i.e. they have been acquired since 31 December 2016.

SOURCE – Physical Silver P-ETC

A silver-backed ETF offered by the ETF provider ‘SOURCE’, which is named the Physical Silver P-ETC, holds its silver bars in a London vault of  custodian JP Morgan. The SOURCE ETF platform was originally established in 2008 as a joint venture between Goldman Sachs, Morgan Stanley, and Merrill Lynch.

The latest silver bar weight list for the Physical Silver P-ETC (dated 23 June) states that it holds 3,129,326 troy ounces of silver (97.34 tonnes of silver). The list does not state an exact bar count, but looking at the weight list, there are about 3,237 silver bars listed.

Inspectorate is also the independent auditor for the Physical silver P-ETC. The latest Inspectorate audit letter, conducted on 4 January 2017, states that at that time, this ETF held 2,048 silver bars containing 1,982,343 troy ounces of silver. This is interesting because about a week ago, this SOURCE Physical silver P-ETC held about 4 million ozs of silver. Now it holds 3.1 million ounces of silver, and at the start of the year it held under 2 million ounces of silver. So the quantity of silver held in this SOURCE silver ETF fluctuates quite dramatically.

Deutsche Bank ETFs

There are 3 ETCs listed on the Exchange Traded Commodity (ETC) section of the Deutsche Asset Management website which hold physical silver in London. These 3 ETCs are as follows:

  • db Physical Silver ETC
  • db Physical Silver ETC (EUR)
  • db Physical Silver Euro hedged ETC

The Factsheets for these 3 Deutsche ETCs all list the custodian as “Deutsche Bank”, but list the sub-custodian as “JP Morgan Chase Bank”. For example, the Factsheet for the db Physical Silver ETC states

“Custodian/Sub-custodian:       Deutsche Bank AG/JP Morgan Chase Bank N.A.”

Shockingly, there do not seem to be any recent independent audit documents for any of these Deutsche ETCs anywhere on the Deutsche Asset Management website. The latest ‘Inventory Audit’ document in the ‘Download Center’ of the website is dated November 2012. That audit document can be viewed here. The old audit document stated that on 25 September 2012, ‘DB ETC Plc’ held 13,314 silver bars containing 13,040,194.3 troy ounces of silver (405.6 tonnes of silver), and that the audit was conducted at ‘Custodian and Location‘ of ‘JP Morgan Chase Bank, N.A. London‘. I have scanned the entire website and there is no sign of any other audit documents or any silver bar weight list.

The initial metal entitlement for units issued in each of these 3 ETCs was 10 troy ounces per unit. The latest units issued figures from Deutsche (dated 22 June 2017) for these ETCs is as follows:

  • db Physical Silver ETC: 277, 500 units issued
  • db Physical Silver ETC (EUR): 533,000 units issued
  • db Physical Silver Euro hedged ETC: 878,000 units issued
  • Total units issued for silver-backed db ETCs = 1,688,500 units

This would mean that in total, these 3 ETCs would have had an initial metal entitlement of 16,885,000 troy ounces of silver. However, due to what looks like operational fees being offset against the metal in these ETCs (i.e. selling silver to pay fund expenses), the effective metal entitlement for each of the 3 ETCs is now stated on the Deutsche website as being less than 10 troy ounces.

For db Physical Silver ETC, the entitlement is 9.6841 ounces. For db Physical Silver ETC, the entitlement is 9.6930 ounces and for db Physical Silver Euro hedged ETC the metal entitlement is a very low 7.9893 ounces.

Therefore, the amount of silver backing these ETCs looks to be (277500 * 9.6841) + (533000 * 9.693) + (878000 * 7.9893) = 14,868,312 troy ounces = 462.5 tonnes. Since there is no bar count, an approximate bar count assuming each bar weighs 1000 oz would be 14,870 Good Delivery silver bars.

Since there are no audit reports and no silver bar weight list for these ETCs, it’s difficult to know if real allocated silver in the form of London Good Delivery silver bars is backing these Deutsche Bank db ETCs, let alone trying to figure how many silver bars are in a JP Morgan vault in London backing these Deutsche products. We can therefore use 462.5 tonne for Deutche but with a caveat that there is no current silver bar weight lists or independent audit documents.

Total ETF Silver held in London LBMA Vaults

Adding up the silver held in the 11 ETFs profiled above yields the following table. In total, the 11 ETFs hold approximately 12,041 tonnes of silver (387.2 million troy ounces) across 4 vault operators. Brinks vaults hold 48% of the total, and JP Morgan vaults hold another 30%. HSBC and Malca Amit hold about 11% each of the remainder.

ETF Silver Holdings -  Tonnes, Held in London Vaults

ETF Silver Holdings – Tonnes, for Silver stored in London LBMA Vaults

In terms of London Good Delivery silver bars, these 11 ETFs hold approximately 400,000 of these silver bars. Since the 3 Deutsche ETFs (ETCs) don’t have an available bar list, I converted the assumed troy ounce holdings to bar totals by assuming each bar held weighs 1000 ozs. Brinks stores over 191,000 of these Good delivery silver bars. That equates to nearly 6,400 pallets with 30 silver bars per pallet. If the pallets were stacked 6 high, and arranged in a square, that would be an area 32 pallets long by about 33 pallets wide. In addition, Brinks may also store silver on behalf of HSBC, or even on behalf of JP Morgan. Who knows?

Number of ETF held Good Delivery Silver Bars stored in London LBAM vaults
Number of ETF held Good Delivery Silver Bars stored in London LBMA vaults

BullionVault

According to the latest numbers on the BullionVault website (Daily Audit), BullionVault has 349,939.57 kgs of silver stored in London. That equates to 11,250,557 troy ozs of silver, or 350 tonnes of silver. This silver is stored in the form of London Good Delivery Silver Bars. According to the BullionVault website, BullionVault use Loomis as a custodian for storing silver bars in London:

“The London (UK) vault is run on our behalf by Loomis International

Those with a BullionVault login can go in and view BullionVault’s latest silver bar weight list which has been generated by Loomis, but BullionVault don’t allow this list to be published externally. Suffice to say, the latest list, dated 11 May, lists 11,544 silver bars which are stored across nearly 400 pallets.

GoldMoney

The GoldMoney website has a real-time audit page which currently states that GoldMoney has 202,057.614 kgs of silver. That equates to 6,496,153 troy ozs of silver, or 202 tonnes of silver stored in London. This silver is also stored with Loomis. At least some of this silver and probably a lot of it is in the form of London Good Delivery silver bars. Without being able to log in to the site properly, it’s not possible to see a bar list.

So between them, BullionVault and GoldMoney have 550 tonnes of silver stored in Loomis vaults in London. My guess is that Loomis (formerly Viamat) store precious metals in a warehouse in Shepperton Business Park, Govett Avenue, Shepperton, a warehouse which is in the corner of the business park, beside the railway track.

Adding this 550 tonnes of silver to the 12040 tonnes of silver held by the 11 ETFs above gives a figure of 12,590 tonnes. Let’s call it 12,600 tonnes. This is then the lower bound on the amount of physical silver in the LBMA vaults in London.

Thomson Reuters GFMS – “Custodian Vault” silver

On its ‘Silver Supply’ web page, the Silver Institute website has an interesting data table titled “Identifiable Above-Ground Silver Bullion Stocks” which lists 5 categories of above-ground silver stocks, namely ‘Custodian vaults’, ‘ETPs’, ‘Exchanges’, ‘Government’, and ‘Industry’.

What’s notable and striking about this table is that the ‘Custodian Vaults‘ category for 2016 amounts to a very large 1571.2 million troy ounces of silver (50,440 tonnes), and also the fact that this ‘Custodian vaults’ category is distinct from silver held in ‘Exchanges’ (such as COMEX and TOCOM) and ETPs / ETFs (such as the ETF products discussed above). The ‘Custodian Vaults’ category also does not include ‘Government’ stockpiles or ‘Industry’ inventories. The actual table and the data in the table are sourced from the Thomson Reuters GFMS “World Silver Survey” 2017 edition. As you will see below, this ‘Custodian Category’ refers to holdings of silver which are not reported, but which are stored in custodian vaults, including in the London vaults. This category therefore needs to be examined in the context of the LBMA’s imminent reporting of silver holdings in the LBMA London vaulting system.

GFMS World Silver Survey - Identifiable silver stocks
Above-ground Identifiable Silver Stocks –  Source: GFMS World Silver Survey 2016. Click to Enlarge

You can also see from the above table that this 2016 Custodian Vaults figure of 1571.2 million ozs (50,440 tonnes) grew from a 2008 total of 615.6 million ozs (19,148 tonnes), so in eight years has risen more than 250%.

On pages 37-38 of this GFMS World Silver Survey 2017 (pdf – large file), GFMS makes some very interesting assertions. GFMS starts by defining what it calls Identifiable silver bullion stocks. It states:

‘Identifiable bullion stocks can be split into two categories: unreported GFMS stock estimates that are based on confidential surveys and field research;  [and secondly] stocks that are reported.

Unreported stocks include the lion’s share of our government category and our custodian vault category.”

Reported inventories are predominantly held in ETPs..but also include some of the government and industry stockpiles.”

However, in the accompanying commentary to the above table, GFMS classifies all ETP, Exchange and Industry holdings as “Reported“, and all Custodian Vaults and Government holdings as “Unreported“. Therefore, it is useful to regroup the 2016 figures from the above table into a Reported category and an Unreported category, as the GFMS commentary then makes more sense. A regrouped table of the 2016 data is as follows, and illustrates that ‘Custodian Vault’ holdings of silver (none of which are reported) account for a whopping 61% of all above ground silver:

Identifiable Above_ground silver stocks grouped by Reported and Unreported
Identifiable Above-ground silver stockpiles, 2016  – grouped by Reported and Unreported categories

A GFMS bar chart in the 2017 World Silver Survey also underscores the dominant position of these (unreported) ‘Custodian Vault’ holdings:

Above
Identifiable above-ground Silver grouped into 5 categories, 2007 – 2016. Largest % is ‘Custodian Vaults’. Source: GFMS World Silver Survey 2017

GFMS goes on to say that in 2016 “Reported stocks were 36% of identifiable stocks“. Conversely, we can see that ‘Unreported’ silver stocks (Custodian Vaults and Government) were 64% of identifiable stocks.

GFMS says that for 2016 “71% of reported stocks were ETPs“, the rest being Exchange and Industry classifications. Exchanges refers to silver held in warehouses of COMEX (NY), TOCOM (Japan) and the SGE and SHFE (China). COMEX is currently reporting 209 million ouzs of silver in its approved warehouses in New York, of which 172 million ozs in Eligible and 37 million ozs is in the Registered category.

Interesting, but on a side note, GFMS also states  in its 2017 silver report that as regards COMEX silver inventories:

“Eligible stocks reported by COMEX contain a portion that is allocated to ETPs”.

“At the end of 2016, the portion of COMEX Eligible stocks that was allocated to ETPs was around 16% of total COMEX eligible stocks.”

This will probably be an eye opener for those interested in COMEX silver warehouse stocks.

Addressing ‘Custodian Vault‘ stocks of silver, GFMS says that Europe’s share of Custodian Vault stocks was 488.7 million ozs (15,201 tonnes) in 2016 and accounted for 31% of total Custodian Vault stocks. Asian ‘Custodian Vault’ stocks of silver were just over 50% of the total with the remainder in North America (Canada and US).

Silver holdings in Custodian Vaults by Region

Silver holdings in Custodian Vaults by Region, 2007 -2016. Source – GFMS World Silver Survey 2017

But what do these ‘Custodian Vault’ stocks of silver refer to?

GFMS does not provide a detailed answer, but merely mentions a number of examples, which themselves vary by region. For Asia GFMS says “the bulk of these stocks are located in China, and reflects stocks held in vaults at banks“, and also ” other parts of Asia, such as Singapore, have been increasing in popularity for storage of bars and coins in recent years“, while in India “global bullion banks increasingly seeking this location as a strategic point for silver vaulting in case the need arises.” There are also silver “stocks in Japan”. From a BullionStar perspective, we certainly are aware that there is a lot of silver bullion in vault storage in Singapore, so the GFMS statement is accurate here.

In North America, GFMS attributes the “growth in silver custodian vaulted stocks not allocated to ETPs” to a “drop in coin sales in North America last year“. In the 2016 edition of the World Silver Survey, GFMS said that the growth in custodian vault holdings was partially due to “the reallocation by some North American investors from their ETP holdings” [into custodian holdings].

Turning to Europe, GFMS says that the growth in Custodian vault silver holdings “can be attributed to increased institutional investor interest“. Therefore, according to GFMS, institutional investors in Europe are buying silver and holding real physical silver in Custodian vaults.

With 488.7 million ozs (15,201 tonnes) of silver held in Europe in ‘Custodian vaults’ that is not reported anywhere, at least some of this silver must be held in London, which is one of the world’s largest financial centers and the world’s highest trading volume silver market.

GFMS states:

“Custodian vault stock data excludes ETP Holdings, but it is important to note that most custodians of ETP silver stocks also store silver in vaults that are not allocated to ETPs. the same is true of futures exchange warehouses.” 

So how much of this 15,201 tonnes of ‘Custodian Vaults’ silver that is said to be in Europe is actually in London vaults? Apart from London, there would presumably also be significant physical silver holdings vaulted in Switzerland and to a lessor extent in countries such as Germany, the Netherlands and maybe Austria etc. So whats’s a suitable percentage for London? Given London’s extensive vaulting network and prominence as a hedge fund and institutional investment centre, a 40-50% share of the European ‘custodian vault’ silver holdings would not be unrealistic, with the other big percentage probably vaulted in Switzerland. This would therefore put previously ‘Unreported’ silver holdings in the London vaults at between 6080 tonnes and 7600 tonnes (or an additional 182,000 to 230,000 Good Delivery Silver bars).

Adding this range of 6080 – 7600 tonnes to the 12,040 tonne figure that the 11 ETFs above hold, gives a total figure of 18,120 – 19,640 tonnes of silver stored in the LBMA vaults in London (545,000 – 585,000 Good Delivery silver bars).

Note, BullionVault and GoldMoney silver is technically part of the ‘Custodian Vault’ figure, so can’t be counted twice.

ps: In its 2017 World Silver Survey, GFMS also stated that in 2016, ETPs (ETFs) held 664.8 million ounces of silver “with 75% of the total custodian vaulted stocks [that were] allocated to ETPs held in Europe and 24% in North America. Asia makes up the balance of less than 1%.“. This would mean that as of the date of the GFMS calculation for 2016, 498.6 million ounces of ETF silver was vaulted in Europe.

Above, I have accounted for 387.1 million ounces of silver that is currently stored in London on behalf of 11 ETFs. There are also 3 Swiss Silver ETFs which store their silver in Switzerland. These are ZKB (currently with 74.9 million ozs), Julius Baer (currently with 13.7 million ozs) and UBS (currently with 5.89 million ozs), giving a total of 94.49 million ozs of silver for these 3 Swiss based platforms. Therefore, between London vaults and vaults in Switzerland, there are currently 14 ETFs that together hold 481.6 million ounces of vaulted silver (14,980 tonnes of vaulted silver).

Conclusion

When the LBMA finally manages to publish its first report on the silver and gold stored in the LBMA vaults in London in the coming days, we will have a clearer picture of how much physical silver is actually in these mysterious and opaque vaults.

A lower bound based on ETF holdings and BullionVault and GoldMoney holdings would be about 12600 tonnes of silver. A higher bound that also reflects ‘Custodian Vault’ holdings could be in the region of 18120 – 19640 tonnes of silver. There would probably also be some LBMA bullion bank float, which may or may not be included in ‘Custodian Vault’ figures, that could push the silver total to over 20,000 tonnes or more.

The LBMA perennially claims that it wants to bring transparency to the London precious metals market. This has been a very hollow mantra for a long time now. However, while some of the LBMA members may want this transparency, others, possibly some of the powerful bullion banks or their clients, certainly don’t want transparency. Take a case in point. At the Asia Pacific Precious Metals Conference (APPMC) in Singapore in early June, the LBMA CEO in a speech to the conference talked about the difficulty of even getting a press release out about the upcoming publication of gold and silver vault holdings data. She said (fast forward to 8:37 in the below video):

It was actually a huge achievement just to get the press release out.”

For what is supposed to be a mature and efficient financial marketplace, this is a truly bizarre occurrence, and it must be pretty obvious that some of the vested interests in the London gold and silver markets needed to be dragged kicking and screaming over the finish line as regards being in any way open about how much gold and silver is actually in these LBMA London vaults.

But now, according to the LBMA CEO in the same part of her speech, even so-called “credible investors” (as opposed to uncredible investors?) also “find it a little odd that as a marketplace, there’s no data“, which may explain the vampires within the LBMA being dragged into the daylight.

Hopefully with the above analysis and the upcoming aggregated LBMA silver vaulting numbers, these “credible investors” (and the hundreds of millions of other silver investors around the world) will now be less in the dark about the amount of silver in the London LBMA vaulting network, and will now have better information with which to make investment decisions when buying silver and selling silver.

The Gold Vaults of Hong Kong: Brinks, Malca Amit, Loomis

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.

Malca Amit

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.

Brinks HK 6th April 2016

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.

Brinks HK vault cumulative to 5th April 2016
Source: www.sharelynx.com

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.

Source: www.sharelynx.com
Source: www.sharelynx.com

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.

Source: www.sharelynx.com
Source: www.sharelynx.com

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.

Source: www.sharelynx.com
Source: www.sharelynx.com

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 CME’s terminology “Regular for Delivery” refers to the following CME definitions:
Regular Warehouse: A processing plant or warehouse that satisfies
exchange requirements for financing, facilities, capacity, and location
and has been approved as acceptable for delivery of commodities against
futures contracts. See Licensed Warehouse.
Licensed Warehouse: A warehouse approved by an exchange from which a
commodity may be delivered on a futures contract. See Regular Warehouse.

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:

CBRE banner

CBRE Malca

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).

affc shot

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.

Outside the Malca Amit vault at the AFFC
Outside the Malca Amit vault at the AFFC

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.

plan

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.

saap

saap2

 

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.

cme malca

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.

atl aerial
ATL Logistics Centre

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.

atl shot
ATL Logistics Centre truck entrance
Inside ATL Logistics Centre
Inside ATL Logistics Centre

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.”

HK map

 

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.

HK Via

Global Gateway is another huge multi-story logistics warehouse that trucks drive into via a circular ramp.

Global Gateway
Global Gateway
Global-Gateway
Global Gateway access ramp

Details of Global Gateway, which is also operated by Goodman, can be seen here (Goodman-Global-Gateway-brochure-2015Dec18 and Goodman-Global-Gateway-brochure-2015Nov17).

The Loomis warehouse is on the 7th Floor of Global Gateway, beside the truck ramp.

Loomis Global Gateway
Loomis – Unit 701, Global Gateway

A video of Level 7 of Global Gateway can be seen here:

 

Global Gateway, Level 7, docking bays:

Loomis 1
Global Gateway, Level 7, units 701 and 702

And a Loomis armoured van exiting unit 701:

Loomis 2
Global Gateway, Level 7, Unit 701, Loomis van

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

 

sgsia 1

sgsia 2

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.

G4S at Castle Peak Road, Kowloon, Hong Kong
G4S at Castle Peak Road, Kowloon, Hong Kong

 

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 (media@hkairport.com) 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’.

Cheong Yip
Cheong Yip Road – entrance to restricted section of Cheong Yip Road, Hong Kong Airport
Cheong Tat Rd
Cheong Tat Road roundabout – Gatehouse 1 entrance to North Perimeter Road, Hong Kong Airport