HSBC Gold Vault London

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Introduction

HSBC Profile

HSBC is an international banking group and one of the largest banks in the world. Its activities span commercial banking, investment banking and trading and wealth management. HSBC has operated its global headquarters from London, England since 1993. Prior to that date, the Bank’s headquarters was Hong Kong. HSBC has a substantial presence in the global precious metals markets, and is active in trading all four precious metals, namely, gold, silver, platinum and palladium. The initials HSBC are derived from the name “Hong Kong and Shanghai Banking” Corporation.

History of HSBC in the London Gold Market

In 1992, HSBC Holdings Plc acquired one of Britain’s largest high street banks, Midland Bank. The following year, HSBC moved its global headquarters to London. Midland had been involved in the London Gold Market since the late 1960s  via a partial ownership of Samuel Montagu. Samuel Montagu & Co was a City of London bullion broker, and one of the 5 original gold fixing members of the London Gold Fixing. In 1974, Midland fully acquired Montagu to form Midland Montagu. This positioned Midland Montagu with one of the 5 ‘Gold Fixing’ seats. In 1999, the HSBC group began using the name ‘HSBC’ for the Gold Fixing seat of Midland Montagu.

In early 2000, HSBC acquired Republic National Bank of New York which was a significant player in the world gold market. Republic National also owned one of the 5 gold fixing seats after having purchased it from Mase Westpac in 1993. Mase Westpac had itself bought that gold fixing seat from Johnson Matthey after it was bailed out by the Bank of England. As part of the Republic National takeover, HSBC sold the newly acquired gold fixing seat to Credit Suisse in 2000, and kept its other seat.

HSBC was one of the 3 members of the daily London Silver Fixing auctions until August 2014, and is now one of the direct participants in the LBMA Silver Price auctions. HSBC was one of the 5 members of the London Gold Fixing until March 2015, and again, was one of the founder participants in the LBMA Gold Price. HSBC was also one of the 4 members of the London Platinum and Palladium Fixing Company and is now one of the 5 participants in the LBMA Platinum and LBMA Palladium Price auctions.

Possible Vault Location

HSBC has never revealed the exact location of its London gold vault. Notwithstanding this peculiar stance from HSBC, its possible that its vault is located in the City of London under Queen Street Place at the entrance to South Bridge approach road. See BullionStar blog “HSBC’s London Gold Vault: Is this Gold’s Secret Hiding Place?” for further details, which makes a strong case for this theory^[1].

HSBC’s London Gold Vault in the Media

Probably the most familiar fact about HSBC’s London vault is that it stores the gold bars backing the large SPDR Gold Trust (GLD). The GLD was launched in 2004, and has always used HSBC London vault as the storage location, since HSBC has always been custodian of the Trust. When first launched in 2004, the SPDR Gold Trust was known as STRETTracks Gold Trust, and only switched name to SPDR Gold Trust in 2008. The old STRETTracks website has many photos of the gold bars stored in the HSBC London vault^[2]. This vault was subsequently referred to by SPDR Gold Trust executives as the ‘old’ vault.

In late 2007, STREETTracks released 4 photos of a ‘new’ looking ‘open-plan’ London vault. These photos can be viewed here^[3].

In mid-2011, US financial news channel CNBC filmed a documentary report from inside the HSBC London vault. This report was presented by CNBC’s Bob Pisani. The CNBC footage is available to view via a number of differnet but similar segments that are available online^[4][5][6].

Vault Layout and Size

Based on the STREETTracks photos of the ‘old’ HSBC London vault, the vault looked to be a rather rundown and well-used underground space where the gold was stored in narrow walled areas that were interspersed with support pillars. The gold bars stored in the vault were organised on wooden pallets, with each pallet holding 1 tonne of gold, and pallets stacked up to 6 high, and then organised into rows. The height of the vault looks to be approximately 4 metres.

The ‘new’ HSBC London vault, as seen in the STREETTracks photos from 2007 and in the 2011 CNBC videos, shows a large rectangular looking open-plan space, where rows of yellow-painted steel support columns hold up horizontally running steel beams.  The gold bars stored in the vault are still stored on wooden pallets (with each pallet holding 1 tonne of gold), and the pallets are stacked up to 6 high, and then arranged into rows. The height of the vault still looks to be approximately 4 metres. The size of the ‘new’ vault was described by a World Gold Council executive as sizable but “not quite as big as a cricket pitch”^[7], and also described as “about the size of a football field“.

Customers holding gold bars at the HSBC Vault

The largest gold storage client at HSBC’s London vault is the SPDR Gold Trust (GLD). At its peak in December 2012, GLD held 1353 tonnes of gold. This would have been the equivalent of 1353 pallets of gold, and if pallets were stacked 6 high, this would be 225 towers of pallets. Another substantial gold storage client of HSBC’s London vault is ETF Securities, whose physically-backed gold ETFs have at times stored up to appoximately 200 tonnes in the vault. HSBC also holds gold for other clients at its London vaults.

From the peak, GLD’s gold bar holdings fell to nearly 700 tonnes in 2015, before increasing to over 800 tonnes. At the same time, the gold bar holdings of ETF Securities held with HSBC London were approximately 170 tonnes. Therefore, just these 2 clients account for nearly 100 tonnes of gold at the HSBC London vault.

HSBC London Vault Capacity and Storage

Its unclear what the maximum capacity of HSBC’s London vault is, but it is probably less than 1500 tonnes. As one of the clearing members of the London Gold Market, HSBC has a gold account at the Bank of England, and its realistic to assume that if HSBC’s own London vault was full or nearly full, then it could use gold storage facilities at the Bank of England or else at one of the other gold vaults that make up the LBMA gold vaulting system.

Gold Bar audits at the HSBC London Vault

The SPDR Gold Trust is physically audited twice per year at the HSBC London vaults. Inspectorate International conducts the audits on behalf of World Gold Trust Services, the sponsor of the SPDR Gold Trust. One of these annual audits is a full gold bar count that takes place to coincide with the trust’s year end of 30 September. The other audit is a random sample count that takes place in March. The SPDR Gold Trust publishes the results of these audits on its website^[8].

A complete bar count is conducted once per year which coincides with the Trust’s financial year end of 30 September. A second random sample count is conducted at a date which falls within the month of March.

Type of gold held at the HSBC London vaults

All of the gold held by the SPDR Gold Trust and ETFS gold ETFs is in the form of London Good Delivery bars ranging in purity from 99.5% to 99.99%. These are the large variable weight bars that are commonly 400 ozs or 12.5 kgs in weight. For example, as of 30 September 2015, the SPDR Gold Trust held 54,807 London Good Delivery gold bars at the HSBC London vaults. Therefore, the vast majority of gold held with HSBC in London is in the form of large Good Delivery bars. This is borne out by the visual evidence from the STREETTracks website and the CNBC video documentary.

Other precious metals vault holdings

ETF Securities operates a UK-listed ETFS Physical Platinum Trust (PHPT)^[9] which at the end of 2015 held 305,700 ozs in the form of 1,981 Good Delivery bars at the HSBC vault in London.

References and Links

1.^ “HSBC’s London Gold Vault: Is this Gold’s Secret Hiding Place?”, BullionStar blog https://www.bullionstar.com/blogs/ronan-manly/hsbcs-london-gold-vault/

2.^ STREETTracks Gold Trust, multiple photos of gold bars in HSBC London vault, from December 2004, June 2005, October 2005  https://web.archive.org/web/20060518124841/http://streettracksgoldshares.com/us/media/gb_media.php

3.^ Photos of HSBC London vault in 2007: Photo 1 https://static.bullionstar.com/blogs/uploads/2016/04/dsc_0127_800.jpg, Photo 2 https://static.bullionstar.com/blogs/uploads/2016/04/dsc_0102_800.jpg, Photo 3 https://static.bullionstar.com/blogs/uploads/2016/04/dsc_0018_800.jpg, Photo 4 https://static.bullionstar.com/blogs/uploads/2016/04/dsc_0005_800.jpg

4.^  “Gold Rush – The Mother Lode”, CNBC, 31 August 2011 http://www.cnbc.com/id/44343442

5.^ “Inside the Secret Vault: $70 Billion in Gold”, CNBC, 8 March http://video.cnbc.com/gallery/?video=3000077579

6.^ ‘The Motherlode’, CNBC, August 2011 https://www.youtube.com/watch?v=kL84posLyFQ

7.^  George Milling-Stanley, World Gold Council, 11 January 2008 http://www.marketwatch.com/story/surging-gold-etf-holds-more-metal-than-some-governments

8.^ SPDR Gold Trust – Inspectorate audits http://www.spdrgoldshares.com/usa/gold-bar-list

9.^  ETFS Physical Platinum Trust (PHPT) https://www.etfsecurities.com/institutional/uk/en-gb/products/product/etfs-physical-platinum-phpt-lse