Gold Trading and Vaulting

Gold markets have gained popularity all over the world as more central banks permit the trading and vaulting of the precious commodity. Many banks purchase this commodity from bullion banks or from mining companies and production areas where it is recycled. Most banks, however, would rather buy gold coins and bars from the global market.

Depending on the bullion banks from which you decide to buy the gold bars, the weights which can be bought will differ. There are limitations when it comes to the minimum number of ounces of gold you can purchase but this depends entirely on the bullion bank in question. The London bullion market has up to 430 fine gold ounces available to those who intend to purchase this precious commodity. There is no need to have any changes made to the gold bars purchased from the bullion banks as they already meet the international gold standards.

For the central banks which choose to buy the gold from mining companies and other production areas where the material is refined, it is always necessary to ensure that that the bars purchased meet international standards in terms of fineness or purity. This is then stored or vaulted in other states for storage on behalf of the central bank with the purchasing power.

The practice of vaulting gold from one central bank to another is not new as it has been in existence for quite some time now and offers common ground for the gold trade. This has not impacted the gold markets positively but has promoted friendships between the banks as well as strong relations between the nations involved in the trade.

This kind of vaulting involving different central banks can either be allocated or unallocated. In the cases where the vaulting is in allocated status, it means that the client has the full ownership of the account determined by the weight, fineness, size and number of actual gold bars vaulted to that account. The unallocated status, on the other hand, gives authority to the receiving bullion bank to sell title to gold to interested parties. The gold remains part of the bank’s liquid reserve and in a crisis situation, the bank can sell the gold to maintain liquidity. You are simply viewed as another creditor of the bank and not the actual owner of the gold.

The major gold custodians who store this gold on behalf of central banks from the different parts of the world are the Bank of England and the Federal Reserve Bank located in New York City.