Swiss banks have traditionally been an eager repository for investors’ gold. But that’s changing as the banks seek to trim their balance sheets.
If investors hold their gold in “unallocated” accounts, as they traditionally have, the gold counts as part of banks’ balance sheets, which means the banks have to hold reserves against them, the Financial Times reports.
Because global regulators are forcing banks to increase their capital as a percentage of their assets, the unallocated accounts have become more expensive for banks.
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So banks want their institutional customers — hedge funds, etc. — to put their gold holdings in “allocated” accounts, where the bank simply acts as a custodian and the gold doesn’t go on the bank’s balance sheets.
“When it’s on balance sheet it does create costs,” a knowledgeable source tells the Times.
UBS and Credit Suisse, which rule the Zurich-based physical gold market, have raised their fees for unallocated accounts by about 20 percent, clients and people familiar with the banks tell the paper.
Meanwhile, gold has benefited from the news that U.S. gross domestic product slipped 0.1 percent in the fourth quarter. Spot gold prices gained $18.41 Wednesday to $1,681.80
"The key thing for investors is that liquidity remains in place,” Dan Veru, chief investment officer at Palisade Capital Management, tells Reuters. “The market, after it digests this information, is likely to continue to buy the dips versus sell the rallies."
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