In the 19th century California gold rush, the surest way to a fortune, according to Mark Twain, was to be in the “pick and shovel business”.
If 2020 gold fever has an equivalent, it’s the exchange-traded funds (ETF) business.
ETFs backed by physical gold and silver accumulated more than $50 billion (Dh183.6bn) of bullion this year. ETFs now hold more gold than every central bank with the exception of the Federal Reserve.
That’s generated windfall fees for ETFs and has been a boon for everyone involved in the business of servicing those enormous hordes of shiny metal. That includes the financial firms that provide the funds to investors, through to the banks and security firms responsible for storing hundreds of billions of dollars worth of gold and silver beneath the streets of London.
There's no question in my mind that ETF demand is driving gold right now
“At these times, it’s a very good business to be in,” said George Milling-Stanley, chief gold strategist at State Street Global Advisors, the marketing agent for the largest gold ETF, SPDR Gold Shares or GLD. “There’s no question in my mind that ETF demand is driving gold right now.”
ETFs typically charge fees as a percentage of the value of their assets. With investors adding to their holdings as spot gold soared to a record above $2,075 an ounce this month, earnings have benefited from a double boost.
Total fees for the top 10 gold ETFs, based on current prices and holdings, are about $610 million a year, according to a Bloomberg News calculation; while for the top five silver ETFs the figure is around $110m. Investors have bought more silver through ETFs in the first eight months of the year than was produced by the world’s 10 largest miners combined last year.
GLD is delivering some $300m of fees a year at current holdings and prices. That’s good news for State Street and also for the World Gold Council – a mining industry-backed group that helped create the ETF – as both take a cut of those fees.
It’s also benefited the few big banks – principally JPMorgan Chase and HSBC Holdings – that hold gold and silver on behalf of the ETFs in underground vaults, behind foot-thick reinforced doors. For them it’s a niche business, but as holdings have surged in value, it has become a solid earner.
GLD’s gold is held in HSBC’s vault in London. The last time the vaulting fees were disclosed, in 2015, they amounted to 10 basis points, or 0.1 per cent, per year for the first 4.5 million ounces held, followed by 6 basis points thereafter. HSBC declined to comment.
Vaulting typically accounts for roughly 10 per cent of the $1.1bn to $1.2bn a year that banks earn from precious metals, according to Amrit Shahani, research director at Coalition Development. But, he said that figure “will be pretty much double” this year.
The surge in demand has strained the system.
GLD’s quarterly reports reveal that beginning in April, it owned some gold that was not held at HSBC’s vault, but instead at the Bank of England, which trails only the Fed in its store of bullion.
As movements of gold were slowed down by social distancing during the coronavirus pandemic, the BOE couldn’t transport the metal quickly enough to HSBC’s own London vault to meet the ETF’s demand, according to people familiar with the situation.
The record pace of silver buying by ETFs is causing other headaches. Bulkier and less valuable than gold, it takes up large amounts of space in a vault.
The custodian for the largest silver ETF, the iShares Silver Trust or SLV, is JPMorgan. For a long time, the fund’s prospectus included a note explaining that if its holdings increased above 500 million ounces, it would seek an additional custodian. But in July, as SLV’s holdings soared above that level, the clause was quietly dropped.
JPMorgan has done several deals with other vault providers in London, and is now storing silver on behalf of the ETF with Malca-Amit, which has a vault close to Heathrow Airport, as well as two vaults owned by Brink’s, according to the ETF’s daily bar lists.
A spokeswoman for BlackRock, which owns iShares, declined to comment.
Still, bankers and logistics providers say there’s still vault space available in London, following an expansion during the last gold bull market. That includes room in HSBC’s vault, according to Milling-Stanley of State Street Global Advisors.
“We’re a corner of HSBC’s vault with GLD,” he said, even with the growth surge in the gold-backed ETF. “The vault is enormous, no question about that. We have space in that vault.”
Jetour T1 specs
Engine: 2-litre turbocharged
Power: 254hp
Torque: 390Nm
Price: From Dh126,000
Available: Now
Specs
Engine: 51.5kW electric motor
Range: 400km
Power: 134bhp
Torque: 175Nm
Price: From Dh98,800
Available: Now
The years Ramadan fell in May
More from Neighbourhood Watch:
THE SPECS
GMC Sierra Denali 1500
Engine: 6.2-litre V8
Transmission: 10-speed automatic
Power: 420hp
Torque: 623Nm
Price: Dh232,500
UPI facts
More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions
Mohammed bin Zayed Majlis
Zayed Sustainability Prize
Abu Dhabi GP schedule
Friday: First practice - 1pm; Second practice - 5pm
Saturday: Final practice - 2pm; Qualifying - 5pm
Sunday: Etihad Airways Abu Dhabi Grand Prix (55 laps) - 5.10pm
Mohammed bin Zayed Majlis
The five pillars of Islam
More on Quran memorisation:
The biog
From: Upper Egypt
Age: 78
Family: a daughter in Egypt; a son in Dubai and his wife, Nabila
Favourite Abu Dhabi activity: walking near to Emirates Palace
Favourite building in Abu Dhabi: Emirates Palace
BMW M5 specs
Engine: 4.4-litre twin-turbo V-8 petrol enging with additional electric motor
Power: 727hp
Torque: 1,000Nm
Transmission: 8-speed auto
Fuel consumption: 10.6L/100km
On sale: Now
Price: From Dh650,000
UAE currency: the story behind the money in your pockets
Vikram%20Vedha
%3Cp%3E%3Cstrong%3EDirectors%3A%3C%2Fstrong%3E%20Gayatri%2C%20Pushkar%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EStars%3A%3C%2Fstrong%3E%20Hrithik%20Roshan%2C%20Saif%20Ali%20Khan%2C%20Radhika%20Apte%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3ERating%3A%C2%A0%3C%2Fstrong%3E3.5%2F5%3C%2Fp%3E%0A
Global state-owned investor ranking by size
|
1.
|
United States
|
|
2.
|
China
|
|
3.
|
UAE
|
|
4.
|
Japan
|
|
5
|
Norway
|
|
6.
|
Canada
|
|
7.
|
Singapore
|
|
8.
|
Australia
|
|
9.
|
Saudi Arabia
|
|
10.
|
South Korea
|
Killing of Qassem Suleimani
The years Ramadan fell in May
Killing of Qassem Suleimani
The%20specs
%3Cp%3E%3Cstrong%3EEngine%3A%20%3C%2Fstrong%3E2.3-litre%204cyl%20turbo%0D%3Cbr%3E%3Cstrong%3EPower%3A%20%3C%2Fstrong%3E299hp%20at%205%2C500rpm%0D%3Cbr%3E%3Cstrong%3ETorque%3A%20%3C%2Fstrong%3E420Nm%20at%202%2C750rpm%0D%3Cbr%3E%3Cstrong%3ETransmission%3A%20%3C%2Fstrong%3E10-speed%20auto%0D%3Cbr%3E%3Cstrong%3EFuel%20consumption%3A%20%3C%2Fstrong%3E12.4L%2F100km%0D%3Cbr%3E%3Cstrong%3EOn%20sale%3A%20%3C%2Fstrong%3ENow%0D%3Cbr%3E%3Cstrong%3EPrice%3A%20%3C%2Fstrong%3EFrom%20Dh157%2C395%20(XLS)%3B%20Dh199%2C395%20(Limited)%3C%2Fp%3E%0A
KILLING OF QASSEM SULEIMANI
Where to donate in the UAE
The Emirates Charity Portal
You can donate to several registered charities through a “donation catalogue”. The use of the donation is quite specific, such as buying a fan for a poor family in Niger for Dh130.
The General Authority of Islamic Affairs & Endowments
The site has an e-donation service accepting debit card, credit card or e-Dirham, an electronic payment tool developed by the Ministry of Finance and First Abu Dhabi Bank.
Al Noor Special Needs Centre
You can donate online or order Smiles n’ Stuff products handcrafted by Al Noor students. The centre publishes a wish list of extras needed, starting at Dh500.
Beit Al Khair Society
Beit Al Khair Society has the motto “From – and to – the UAE,” with donations going towards the neediest in the country. Its website has a list of physical donation sites, but people can also contribute money by SMS, bank transfer and through the hotline 800-22554.
Dar Al Ber Society
Dar Al Ber Society, which has charity projects in 39 countries, accept cash payments, money transfers or SMS donations. Its donation hotline is 800-79.
Dubai Cares
Dubai Cares provides several options for individuals and companies to donate, including online, through banks, at retail outlets, via phone and by purchasing Dubai Cares branded merchandise. It is currently running a campaign called Bookings 2030, which allows people to help change the future of six underprivileged children and young people.
Emirates Airline Foundation
Those who travel on Emirates have undoubtedly seen the little donation envelopes in the seat pockets. But the foundation also accepts donations online and in the form of Skywards Miles. Donated miles are used to sponsor travel for doctors, surgeons, engineers and other professionals volunteering on humanitarian missions around the world.
Emirates Red Crescent
On the Emirates Red Crescent website you can choose between 35 different purposes for your donation, such as providing food for fasters, supporting debtors and contributing to a refugee women fund. It also has a list of bank accounts for each donation type.
Gulf for Good
Gulf for Good raises funds for partner charity projects through challenges, like climbing Kilimanjaro and cycling through Thailand. This year’s projects are in partnership with Street Child Nepal, Larchfield Kids, the Foundation for African Empowerment and SOS Children's Villages. Since 2001, the organisation has raised more than $3.5 million (Dh12.8m) in support of over 50 children’s charities.
Noor Dubai Foundation
Sheikh Mohammed bin Rashid Al Maktoum launched the Noor Dubai Foundation a decade ago with the aim of eliminating all forms of preventable blindness globally. You can donate Dh50 to support mobile eye camps by texting the word “Noor” to 4565 (Etisalat) or 4849 (du).
The five pillars of Islam
Yuki Means Happiness
Alison Jean Lester
John Murray
THE BIO:
Sabri Razouk, 74
Athlete and fitness trainer
Married, father of six
Favourite exercise: Bench press
Must-eat weekly meal: Steak with beans, carrots, broccoli, crust and corn
Power drink: A glass of yoghurt
Role model: Any good man
More from Neighbourhood Watch:
UAE currency: the story behind the money in your pockets
The burning issue
The internal combustion engine is facing a watershed moment – major manufacturer Volvo is to stop producing petroleum-powered vehicles by 2021 and countries in Europe, including the UK, have vowed to ban their sale before 2040. The National takes a look at the story of one of the most successful technologies of the last 100 years and how it has impacted life in the UAE.
Read part four: an affection for classic cars lives on
Read part three: the age of the electric vehicle begins
Read part one: how cars came to the UAE
More coverage from the Future Forum
Killing of Qassem Suleimani
What is the FNC?
The Federal National Council is one of five federal authorities established by the UAE constitution. It held its first session on December 2, 1972, a year to the day after Federation.
It has 40 members, eight of whom are women. The members represent the UAE population through each of the emirates. Abu Dhabi and Dubai have eight members each, Sharjah and Ras al Khaimah six, and Ajman, Fujairah and Umm Al Quwain have four.
They bring Emirati issues to the council for debate and put those concerns to ministers summoned for questioning.
The FNC’s main functions include passing, amending or rejecting federal draft laws, discussing international treaties and agreements, and offering recommendations on general subjects raised during sessions.
Federal draft laws must first pass through the FNC for recommendations when members can amend the laws to suit the needs of citizens. The draft laws are then forwarded to the Cabinet for consideration and approval.
Since 2006, half of the members have been elected by UAE citizens to serve four-year terms and the other half are appointed by the Ruler’s Courts of the seven emirates.
In the 2015 elections, 78 of the 252 candidates were women. Women also represented 48 per cent of all voters and 67 per cent of the voters were under the age of 40.
Mohammed bin Zayed Majlis
UAE currency: the story behind the money in your pockets
Mohammed bin Zayed Majlis
KILLING OF QASSEM SULEIMANI
