A rumor that HSBC is rapidly and quietly closing gold vaults where clients gold bullion was stored and gold in the GLD ETF is stored has been swirling around the internet.
After conversations with key players in the industry including a bullion dealer who used the safety deposit boxes for storage and delivery to clients, we can now confidently say that the speculation was incorrect.
What HSBC is actually doing is closing its safety deposit box facilities some of which are in vaults and strong rooms in branches. The vaults are not specialist gold vaults rather standard vaults or strong rooms which contain safety deposit boxes. These safety deposit boxes hold all sorts of valuables – from legal documents, to family heirlooms, to art works, to jewellery and of course bullion coins and bars.
Availability of safety deposit boxes is in decline in Britain and much of the world. Costs of security, insurance and opportunity to use such facilities in a more profitable manner are driving the closures. Banks in Ireland including the Bank of Ireland claim that the safety deposit boxes are “causing an unacceptable health, safety and security risk in some branches.”
While the move is understandable from a purely profit motive point of view, it must be remembered that this is a greatly needed service by many people including entrepreneurs and professionals who need to safe keep important legal documents that they are not comfortable keeping in a home or office. It is also a greatly needed service for the elderly and other people who have valuable jewelry and heirlooms that they are uncomfortable keeping in the house.
It is another case of banks blindly pursuing profit ahead of the interests of their own clients.
Banks and insolvent governments desperate for cash likely also dislike safety deposit boxes as they are means for people to protect and grow wealth and protect themselves from inflation and indeed bail-in and deposit confiscation. A percentage of box holders also store cash and bullion.
In our brave new world of the "cashless society," the financial independence and freedom that a safety deposit box confers upon the citizen is frowned upon.
As a consequence citizens are being deprived of the opportunity of having their savings, valuables and wealth stored outside of the increasingly precarious financial system and digital banking system.
The implications of the rumours were significant. Analysts speculated that a precious metals market disruption might be imminent and with it delivery calls by clients who believe they own physical gold in GLD which HSBC most likely could not meet.
Such an event would likely have a dramatic upward effect on the price of gold not to mention a catastrophic effect on the finances of those who believe they actually own physical gold in ETFs. Irish Finance Minister, Michael Noonan, being one recent buyer of the gold ETF.