Gold Investors Being Evicted

December 10, 2009
Michael Sheehan

HSBC Bank, owner of one of the largest vaults in the US, recently told its retail clients to find another place to store their gold bars and coins. Operating on already razor-thin margins, the bank has decided to concentrate on more lucrative institutional clients.

To some financial advisors, investing in gold brings some unwanted baggage with it. Among the downsides is that the metal is hardly a liquid asset. It also earns no interest; the only profit comes when and if it rises in price. Another negative is that investors who buy physical gold need a safe place to store it. Despite this negative advice, gold enthusiasts have laughed all the way to the vault as the price of gold has shattered records on its way to more than $1,200 an ounce. Now, however, some of those investors are finding that the vault is closed.

HSBC Bank, owner of one of the largest vaults in the US, recently told its retail clients to find another place to store their gold bars and coins. Operating on already razor-thin margins, the bank has decided to concentrate on more lucrative institutional clients. Big investors typically buy standard 100-ounce or 400-ounce bars, which are easier to store than the mix of coins and non-standard bars that retail gold buyers generally accumulate.

HSBC’s retail clients have been told that they must arrange to have their gold moved or have it delivered to them at their expense. Moving gold is no easy job, however, and it can be costly, according to industry experts. Armored cars are often the vehicle of choice and they usually come with two or three armed guards. Finding another vault to store gold is also becoming a problem as many vaults are filling up because of the huge surge in demand for physical gold.