The rise in ETF investments is having one unexpected consequence, Swiss banks are finding they don’t have enough room to store all the physical gold required on behalf of investors and institutions. The success of gold fund ETF’s which are supported by physical gold holdings has meant a rise in demand for secure storage space according to a Reuters article. Physically-backed gold ETCs saw the largest flows, with inflows during 1Q09 increased at 3.7 times the pace of inflows during 4Q08 – the largest quarterly increase on record.
Swiss bankers are said to be in despair trying to find secure space as vaults are reaching overflow, especially in the gold capital Zurich. As opposed to US funds which have seen a slight decrease in gold weightings, the Swiss are still seeing over 3% growth this year according to the article. Apparently silver is being moved out to contract storage to make room for the gold.
The Swiss still hold 38% of their foreign exchange reserves in gold, as against the global average of 10%. Switzerland holds about 1000 tons of gold as federal reserves, about the same as China and as the IMF, and according to Wikipedia about the same as was held by ETF’s at September of last year.
Banks may have to start making room for more palladium and platinum as ETF’s move a greater weighting into those metals and the launch of several pure platinum plays will only add to the problem. Now if I clear out a little space at the back of my garage ¦