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Swiss | 11-24-2009 12:52 AM
A Mad Rush as Gold Bugs Get the Boot A Mad Rush as Gold Bugs Get the Boot WSJ By CAROLYN CUI Fleets of armored trucks piled with gold bars and coins have been streaming out of midtown Manhattan in one unexpected consequence of the gold craze. Amid gold's rise -- it has gained 32% this year and reached a record on Monday -- investors have been loading up on bullion and coins. One big problem now is where to store it. The solution from HSBC, owner of one of the biggest vaults in the U.S.: somewhere else. HSBC has told retail clients to remove their small holdings from its fortress beneath its tower on New York City's Fifth Avenue. The bank has decided retail customers aren't profitable enough and is demanding those clients remove their gold to make room for more lucrative institutional customers. An HSBC spokeswoman said the firm doesn't comment on its vault due to "security concerns." HSBC's decision has created a logistical nightmare for both the investors and the security teams in charge of relocating the gold, silver and platinum to new vaults across the country. Many of those vaults are also feeling pressure from the surge in demand for space from clients that have stocked up on metal. Investors have been loading up on gold this year amid worries about inflation and the stability of the U.S. dollar. The metal gained $17.90, or 1.6%, to $1164.30 an ounce on Monday. As gold has continued to set new records, other investors have flooded in. Many of them are taking possession of the metal, rather than just trading financial contracts linked to it. Demand for physical gold, including bars and coins, is projected to rise 21% this year to 52.3 million troy ounces, the highest in history, according to CPM Group. Based on today's price, the total value would amount to about $61 billion. The movement of gold from HSBC has created a stir not only among the bank's clients, but also among owners of warehouses and vaults around the country. "I have never seen any relocation like this," says Jonathan Potts, managing director of FideliTrade, the parent company of the Delaware Depository Service Co., which has two warehouses in Wilmington. FideliTrade's two vaults have been filling up at an unprecedented pace, in part because it is taking in metal that has been ejected by HSBC. Dealing with the fallout from HSBC's decision has become a full-time job for David Norris, executive vice president of GoldStar Trust Co., a Canyon, Texas-based retirement-account trustee, which organizes metal storage for its clients. Mr. Norris says HSBC told GoldStar in July to immediately cease sending coins for storage. GoldStar, which had sent clients' holdings to HSBC for at least 15 years, is now figuring out how to get the coins out of the HSBC vault and down to the Delaware facility. "I can jump up and down and scream all day long about how much I don't like it. But it's their business decision," Mr. Norris says. Moving the metal is like "a big military operation," he says. Precious metals are typically shipped by insured carrier services or armored trucking companies. Carriers sometimes ship the metals in plain boxes so as not to attract attention. Trucks are guarded by a team of two or three armed personnel. Bradley Beyer, a GoldStar customer in Kewaunee, Wis., has 50 100-ounce silver bars stored with HSBC waiting to be moved. "My only concern is that the bars will be moved safely," he says. HSBC is telling clients to either move their metal, or prepare for it to be delivered to their doorsteps. In a July letter, seen by The Wall Street Journal, HSBC said the precious metal "will be returned to the address of record... at your expense," unless instructed otherwise. HSBC recommended clients move their holdings to Brink's Global Services USA Inc., which has a vault in Brooklyn, N.Y. Brink's didn't return calls and emails seeking comments. Like Mr. Beyer, many investors have recently added precious metals to their retirement accounts. At GoldStar, more than 1,000 new accounts are opened each month to purchase coins in retirement plans, compared to about 100 a month in 2006. Sales of American Eagle gold coins jumped 65% so far this year, according to the U.S. Mint. "Many facilities are overloaded," says Bob Coleman, director of customer relations at Gold Silver Vault, a depository in Nampa, Idaho. Mr. Coleman says his vault has taken in several HSBC customers, contributing to the 500% growth in new metal coming in over the past quarter. Vault and warehouse owners say retail customers tend to be more expensive in part because of their diverse holdings. They usually buy American Eagle or Canadian Maple Leaf coins, and bars of various weights and sizes, all of which need to be categorized and stored separately. In contrast, institutions typically buy standardized bars of 100 or 400 ounces, making them easier to store. Institutions also tend to hold the metal for long periods. Precious-metal storage isn't as lucrative as it may sound. Many vaults are run on thin margins. The Delaware depository, one of the five major ones in the country, charges $6 each month for a 1,000-ounce silver bar and $12 for a 100-ounce gold bar. HSBC's vaults contain $6 billion of large gold and silver bars, according to records held by Comex, the metals division of CME Group. There are no data for smaller coins and bars held by individuals. First Eagle Funds, which runs a family of mutual funds, has 2.2 million ounces of gold stored at HSBC's vault, and hasn't been told to vacate the premises. Physical bullion represents "insurance and the safest asset out there," says Rachel Benepe, who runs the First Eagle Gold Fund. Typically, a vault is protected with a 27-inch thick steel reinforced wall, surrounded with a "man-trap" -- a series of doors, each of which opens only after the previous door is locked, Mr. Coleman says. http://online.wsj.com/article/SB125902295608261455.html You need to be a subscriber to view this link. If you google the contents of the article, google will provide the complete article. In light of by posts about storage, this scenario poses a problem for many.

shortstack | 11-24-2009 01:16 AM
Re: A Mad Rush as Gold Bugs Get the Boot Figures that HSBC has no regard for the retail investor who elects to purchase physical, as opposed to their worthless ETF paper Bull Shyte alternative. Yes, I can see the business sense behind their decision, but why kick out the precious metal IRA clients (the goldstar people - my father is one BTW). You know, all that has to happen here is for Joey "Bricks" Soprano and his "crew" to knock off a few of the goldstar shipments. And if "Joey" succeeds, than then Russian and Mexican mob will also want to try their hand a stage coach robberies. Then, news hits and people start to think twice about this whole precious metal IRA thing. Which is great because then they will have to go back to the "safer" investments, like GLD and SLV Perhaps the real reason why HSBC is doing this is that Joey "bricks" Soprano" suggested this to one of the HSBC executives. Perhaps, six months back, a group of married HSBC executives were partying ay Joeys strip club, the botta bang. These executives were brought up to the "executive" lounge after hours, with many compromising photos taken during the "party". Then Joey suggests this new "business" decision to the compromised executives....

harper | 11-24-2009 01:47 AM
Re: A Mad Rush as Gold Bugs Get the Boot sounds like good news to me. 'to make room for more lucrative institutional customers'

Twisted Avatar | 11-24-2009 09:26 AM
Re: A Mad Rush as Gold Bugs Get the Boot The Gold is leaving Manhattan for "safer" locales Who would have thunk it? 2010 is gonna be one for the history books as the level of violence will reach a fever pitch as people will have lost so much and want to lash out. T

jogslvr | 11-24-2009 12:01 PM
Re: A Mad Rush as Gold Bugs Get the Boot Its prolly guvmint gold headed to China to pay interest on debt. :504:

Tecumseh | 11-24-2009 01:06 PM
Re: A Mad Rush as Gold Bugs Get the Boot My guess is increased fees are coming soon to small investors. Maybe time to take the tax hit, get the goods and then go buy that boat that I have always dreamed of.....

Kregener | 11-24-2009 01:10 PM
Re: A Mad Rush as Gold Bugs Get the Boot I remain dubious of any story put out by the WAR Street Journal.

Tecumseh | 11-24-2009 01:16 PM
Re: A Mad Rush as Gold Bugs Get the Boot The Gold Star trust part is true. They alerted their customers some months ago that HSBC would no longer take new deposits from them and that eventually existing holdings would be moved to Delaware Depository.

HistoryStudent | 11-24-2009 02:37 PM
Re: A Mad Rush as Gold Bugs Get the Boot Old news real gold coins and bars are HATED - so hated that the PTB even make phoney ones in: PAPER DERRIVATIVES FUTURES CONTRACTS and now: Tungsten TOO! :headsand: Sheeple going to get RHEEMED ROYALLY :yes: So REAL STUFF: hold it close dear and quiet

silverblood | 11-24-2009 03:26 PM
Re: A Mad Rush as Gold Bugs Get the Boot If those small investors are smart, they'll arrange to take physical possession of their bullion. HSBC is actually doing them a favor by forcing the small holders to make this decision. Insert favorite GIM aphorism here: (i.e., "If you don't hold it, you don't own it.)

Tecumseh | 11-24-2009 04:57 PM
Re: A Mad Rush as Gold Bugs Get the Boot I think that you are probably correct Silverblood. Perhaps to some extent this is also an indicator that many of the ETF's are holding increasing amounts of physical - maybe not as much as they say but certainly a lot.

HistoryStudent | 11-24-2009 05:04 PM
Re: A Mad Rush as Gold Bugs Get the Boot Quote:
Originally Posted by silverblood (Post 2042752) If those small investors are smart, they'll arrange to take physical possession of their bullion. HSBC is actually doing them a favor by forcing the small holders to make this decision. Insert favorite GIM aphorism here: (i.e., "If you don't hold it, you don't own it.)
Most of them are "Chicken littles" fools that trust the big BOYZ to play patsy with their hard assets & lose their A$$! **************************************

Hellsbane | 11-24-2009 05:13 PM
Re: A Mad Rush as Gold Bugs Get the Boot The silver lining. Massive ammounts of gold, silver, platinum are not being stored in one location. Its seems to me to be wise to " spread the liability " around.

gbgunner | 11-24-2009 05:22 PM
Re: A Mad Rush as Gold Bugs Get the Boot Quote:
So REAL STUFF: hold it close dear and quiet
This bears repeating.

andial | 11-24-2009 07:53 PM
Re: A Mad Rush as Gold Bugs Get the Boot Quote:
Bradley Beyer, a GoldStar customer in Kewaunee, Wis., has 50 100-ounce silver bars stored with HSBC waiting to be moved. "My only concern is that the bars will be moved safely," he says.
50 bars? I'm sorry this guy should be able to store them where it's nobody's business instead of keeping them with a financial institution.

Tn...Andy | 11-25-2009 08:02 AM
Re: A Mad Rush as Gold Bugs Get the Boot The problem is, like the Wisconsin guy, that they are using an IRA to buy the metals.....and all tax sheltered plans like this require a custodian to hold the assets.

andial | 11-25-2009 06:22 PM
Re: A Mad Rush as Gold Bugs Get the Boot Why do people have to make things so complex. IRA's, custodians for the metal etc. (when I grew up a custodian was a guy who cleaned the school). I say Just buy and hide, keep it simple.

FunnyMoney | 11-25-2009 07:00 PM
Re: A Mad Rush as Gold Bugs Get the Boot Quote:
Originally Posted by shortstack (Post 2041964) Figures that HSBC has no regard for the retail investor who elects to purchase physical, as opposed to their worthless ETF paper Bull Shyte alternative. Yes, I can see the business sense behind their decision, but why kick out the precious metal IRA clients....
They could have easily made more room or built another safe, it's a disregard for society and community. But agree it's probably best the accounts cash out and get the physical on hand. Something big could happen.

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