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The world’s largest gold exchange-traded fund is to store some of its inventory outside London for the first time in a bid to facilitate further expansion.
The $52.5bn SPDR Gold Trust (GLD) has held all its bullion in HSBC’s London vaults since its inception in 2004 as the first physically backed gold ETF.
However, it is now adding a second custodian, JP Morgan, which uses US bank vaults in Zurich and New York as well as London. Gold ETFs are believed to have multiple custodians.
“[GLD] There was a market innovation in 2004, which positioned us as the market leader. It’s almost 20 years old now and we’ve found a new way to innovate with it,” said Joe Cavattoni, chief executive officer of the fund’s sponsor, World Gold Trust Services.
GLD is a major player in the bullion market, accounting for more than 25 percent of all gold ETF assets. At the peak of the gold boom in July 2020, when prices topped $2,000 a troy ounce, the fund’s holdings topped 1,200 tonnes, making it the owner of more than central banks in Japan or India.
It still holds more than 900 tonnes, despite outflows from gold funds, as prices have softened to $1,800 per troy ounce. JPMorgan and HSBC are the world’s leading bullion banks.

Cavattoni said no clients had asked to move their assets out of London or away from HSBC and there were no capacity issues in HSBC’s vaults.
He said the decision to bring JP Morgan on board was not driven by financial considerations. There is no cost impact on investors by embedding the custody fee in the 40 basis point annual management fee.
However, Cavatoni said, “from a risk management perspective we can see some benefits from increasing the diversification of storage sites”.
GLD’s bullion is insured by HSBC, but the bank has a standard natural disaster A clause in place that means it is not liable for damages caused by terrorist attacks, wars or acts of God.
The decision to bring another custodian on board “is not necessarily something that happens to gold. The insurance that the industry holds at the treasury level is based on what they feel will cover the probability of an event. It is a factor, but it is not a driving factor,” Cavatoni added.
“It allows us to grow, talk to our customers and make sure we have some diversification away from just one provider,” he said.
“It’s about the fact that we have a vested interest in another treasury and another custodian to service the largest gold ETF in the world. We are excited about this innovation.”
HSBC said it was “delighted to continue to act as custodian for the World Gold Council’s SPDR Gold Trust”.
JPMorgan, along with HSBC and several other banks, already act as authorized participants for GLD, creating and redeeming blocks of shares in exchange for gold bullion.
The creation and redemption process will continue out of London but the WGTS, an arm of the World Gold Council, “will have the opportunity to move the gold at our discretion, if we choose”, Cavattoni said.
However, this will not involve physically transporting gold bars from one place to another, he added. Instead, the process will be based on book transfers of existing holdings of bullion, meaning GLD will hold separate gold bars.

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