How gold-backed ETFs affect London's gold vault holdings

Goldhub blog

How gold-backed ETFs affect London's gold vault holdings

Krishan Gopaul
Market Intelligence Group
World Gold Council


Sitting in-between the major trading centres of New York (COMEX) and Shanghai (Shanghai Gold Exchange) is the beating heart of the physical gold market: London.

As most of the trading in London takes place ‘over-the-counter’, a significant portion of it was historically hidden from view. But since 2017, the London Bullion Market Association (LBMA) has been publishing the amount of gold held in vaults within London, following this up with a more detailed trade data series in November 2018.1 2 This data not only includes vaulted holdings from the seven custodians offering vaulting services, but also the holdings at the Bank of England.3

According to the latest LBMA statistics there was over 7,600t held in vaults within the M25 motorway which surrounds London (and often doubles as Europe’s largest car park).4 And a significant amount of the space in these vaults is taken up by pallets owned by gold-backed exchange-traded funds (ETFs). This shows how important these products have become in respect to gold ownership. Since their introduction in 2003, global holdings in gold-backed ETFs have grown to almost 2,500t (having previously hit a peak of almost 3,000t).

We estimate that almost 20% of gold vaulted in London is allocated to gold-backed ETFs, accounting for just over 50% of global gold-backed ETF holdings. It should come as little surprise then that changes in vault holdings in London and ETF holdings track one another fairly closely – with a correlation of 0.53 (see chart).


So, as London vault holdings are published with a three-month lag, looking at our ETF holdings data each month might give you a good indication on how the vault holdings are changing. Why is this important? Well, given London’s powerful position within the gold market, it is often interesting to know what the stock of gold is. Any change in this metric could mean a shift in demand. A prime example of this was in 2013 when a flood of gold left London vaults destined for China, where consumers were hungry for gold following a significant price drop.5

As with most data, a single data series can be interesting, but it’s when you combine it with others – to get a more complete picture – that it becomes more powerful. For more detailed data on gold-backed ETFs, please see here and our Gold Demand Trends report.




[3] The seven custodians offering vaulting services (all LBMA members) are: Brinks, G4S Cash Solutions (UK), Malca-Amit, Loomis International Ltd HSBC, ICBC Standard Bank and JP Morgan.

[4] Correct as of end-February, as the data is published with a three-month lag