Largest Bullion Vault in Hong Kong Signals Asian Wealth

July 27, 2012 – The largest gold-storage facility in Hong Kong, which is able to store approximately 22 percent of the gold bullion that now resides at Fort Knox, is due to open in September to meet rising demand from banks and wealthy clientele, according to Bloomberg.

The facility is located on the ground floor of a building in the international airport compound and has the capacity to hold 1,000 metric tons, according to Joshua Rotbart, a general manager for the Hong Kong-based Malca-Amit Precious Metals unit within the company.

Two of the vaults are prepared to hold assets such as gold for banks and financial institutions and other vaults will be used to store diamonds, jewelry, fine art, and precious metals according to Rotbart.

The Hong Kong vault is a reflection of increasing demand for gold in Asia as the commodity continues a rally into its twelfth year. Gold demand in China, according to the World Gold Council, is slowing. Rotbart explained that charges for holdings would depend on the operations of each customer.

Sunil Kashyap, head of Asia-Pacific foreign exchange and precious metals with Scotiabank explained that Hong Kong is very important center for gold particularly as a doorway into Mainland China. Relative international centers for gold include New York, Zurich, and London. An Asian hub for physical gold is still needed in the market, according to Kashyap, who explains the trend for more investors looking for storage and trading of physical gold in Asia.

The trend, according to Rotbart, is for moving assets from the West to the East, adding that proximity to China is very important in terms of trading.

During the extended rally of 2001 to 2011, investors sought protection from weak currencies and the risks of inflation in gold. Central banks were also vastly increasing holdings during this time. The fundamentals of these buying trends have not changed in the current market, particularly with central banks continuing a multi-decade high in gold buying.

The metal traded at $1,618.75 per troy ounce in Hong Kong, 3.5 percent higher for the year. In 2011, the gold market rose 10 percent. Gold held in exchange-traded funds reached a record of 2,413.61 tons of July 5, according to Bloomberg.

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