There's A Race For Vault Space As Physical Gold Demand Surges Globally

It’s a bull market in gold vaults.

The surging gold price has sparked a significant uptick in demand for physical bars and coins. And with so many investors stacking gold, they need someplace to store all that metal.

Sharps Pixley told The Financial Times that its vaults are packed “floor to ceiling.” The London-based bullion dealer is seeking a site to build an additional depository.

Swiss gold group MKS Pamp also needs more storage. The company’s chief commercial officer, Omar Leiss, said he is looking to build a “substantial” vault specifically catering to the group’s richest clients.

“When people are leaving $200 million or more with us, we want to make sure we have the right infrastructure in place for them.”

Leiss said he’s noticed a surge in demand for the company’s top-tier “white glove service” serving clients investing a minimum of $50 million over the last 12 to 18 months.

“They want it as a safety net. If for any reason the banking system collapses, at least they have this gold that is physically allocated and outside the banking system.”

These are not an isolated phenomenon. As The Financial Times reports, there is a global race to build additional precious metals vaults “from Switzerland to Singapore.”

“This is a problem the industry doesn’t usually have — after all, gold takes up very little space, and a vault can last for hundreds of years. But the blistering rally in the gold price, which has doubled in the last three years, and accompanying surge of demand from wealthy individuals who insist on holding their gold in physical bar form, have prompted a small rush of activity in the normally sleepy vaulting sector.”

Swiss Gold Safe operates six vault locations. COO Ludwig Karl said the company needs to expand every single depository.

Sharps Pixley director said the need for more vaulting space is partly a function of wealthy investors pivoting out of gold-backed ETFs.

“It is not ETFs that clients want now. It is bars. It is coins.”

ETFs are a convenient way for investors to play the gold market, but owning ETF shares is not the same as holding physical gold. You don't own metal. You own paper.

Another gold dealer with vaults in eight sites globally told the FT that “physical gold has become very in vogue,” noting that many of his clients who were focused on ETFs two years ago now want gold bars and coins.

“They want to have a highly liquid asset, but they also want to have it in multiple jurisdictions. They want to be as close to the metal as possible, and they want as few intermediaries as possible.”

Despite the January price correction and gold trading sideways in the ensuing months, wealthy investors remain bullish on gold.

As Hong Kong-based Cavendish Investment Corporation managing partner Jean-Sebastien Jacquetin put it, the decline in the price did not “change the case for gold.”

“There is a correction in the market, which is normal. But fundamentally gold is still highly in demand.”

He said some families his company serves hold a quarter to a third of their portfolio in gold.

A recent HSBC survey found that nearly half of high net-worth investors plan to increase their gold allocations in the next year. Only 13 percent said they had plans to decrease their gold holdings.

The survey found that gold is especially popular among Gen Z investors. Many maintain a 50 percent or more allocation to the yellow metal.

“Gold could end 2026 as Gen Z’s leading non-cash asset, ahead of equities,” according to the HSBC report.

The debasement trade seems to be juicing gold demand pressure. This is an investment strategy that emphasizes holding tangible assets such as gold, silver, and other commodities to protect against the decline of fiat currencies by monetary debasement.

We see the debasement trade in action as central banks and many foreign investors swap dollar-denominated assets, particularly Treasuries, for gold.

Treasuries have been selling off in recent months, with many countries increasingly wary of holding U.S. debt. The national debt eclipsed $40 trillion last week, and with U.S. policymakers seemingly uninterested in addressing out-of-control borrowing and spending, America’s fiscal situation doesn’t inspire confidence.

On top of the fiscal problems, the U.S. has weaponized the dollar as a foreign policy tool. This has made some countries even more wary about holding greenbacks.

World Gold Council market strategist John Reed has noticed this trend.

“What gold tells you is that, in general, people are concerned that we are heading towards a more fractured, less stable, less predictable world, where the U.S. is seen as a less trustworthy partner — that U.S. Treasuries are perhaps not what they were in the past.”

If you opt for third-party vaulting, it’s important to find a trusted partner.