Make Kitco Your Homepage

JPMorgan, HSBC to share custody of GLD's 900 tonnes of gold

Kitco News

Editor's Note: With so much market volatility, stay on top of daily news! Get caught up in minutes with our speedy summary of today's must-read news and expert opinions. Sign up here!

Editor's Note: The article was updated to include comments from Joe Cavatoni in an interview with the Financial Times

(Kitco News) - The world's biggest gold-backed exchange-traded fund is positioning itself for continued growth as SPDR Gold Trust (NYSE: GLD) announced another custodian to hold its gold.

In a press release Thursday, the ETF said that as of Dec. 6, JPMorgan Chase will act as a second custodian and hold its gold in values in London, New York and Zurich. Currently, HSBC holds all of the fund's gold.

GLD currently holds 900 tonnes of gold valued at nearly $52 billion. According to reports, the addition of JPM as another gold custodian comes as no surprise as the two intitutions are the world's biggest bullion banks.

"The addition of JPM will change the current, single-custodian and vault operating model, to accommodate the activity of the fund in anticipation of future growth," the ETF said in a statement.

"The addition of JPM as a custodian, alongside HSBC, demonstrates our ambition for further growth of the fund and we are confident this change will be welcomed by investors," added Joe Cavatoni of World Gold Trust Service, a subsidiary of the World Gold Council.

In an interview with the Fincial Times, Cavatoni said, that from“risk management perspective there are some benefits to having diversifed vaults.

“It gives us the ability to grow, to talk to our clients and ensure that we do have in place some diversification away from just a single provider,” he said.

The latest move from GLD comes as the gold market has seen lackluster demand and falling prices through most of the year. Investors have shunned gold as inflation, rising at its fastest pace in 40 years, has forced the Federal Reserve to raise interest rates at an unprecedented pace.

After a solid start to the year, the fund is now seeing net redemptions. So far this year, 67.57 tonnes of gold have flowed out of GLD; as of Nov. 30, the ETF held 908.09 tonnes of gold.

Although the precious metal has struggled this year, many analysts remain bullish on the precious metal in the long term. A growing chorus of market analysts has said that gold should regain its luster by the second half of 2023 when the Federal Reserve ends its tightening cycle and pivots on interest rates.

Gold has a path to $2,000 and silver to $25 in the second half of 2023 - Bank of America

With prices up nearly 3% Thursday, the precious metal appears to be attracting some new bullish attention following dovish comments from Federal Reserve Chair Jerome Powell.

Speaking at an event Wednesday hosted by the Brookings Institution, Powell said that it would be appropriate to slow the pace of rate hikes going forward.

"One risk management technique is to go slower and feel our way to what we think is the right level. Another is to hold on longer at a high level and not loosen policy too early," he said.

February gold futures last traded at $1,811.40 an ounce, up 2.94% on the day.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.