Image copyright WPA Pool Image caption The Queen inspects one of the gold vaults in the Bank of England in 2012

The world's biggest bank has agreed to buy a vault for gold and precious metals in London. But how many of these vaults are there, and how much gold do they hold, asks Claire Bates?

The streets of London may not be paved with gold, but there is certainly a huge amount stored underneath them. About 6,500 tonnes is stored in seven vault-systems under the city.

The largest by far lies in the Bank of England. It holds three-quarters of the gold in London, or 5,134 tonnes. Most of the gold is stored as standard bars weighing 400 troy ounces (12.4 kg or 438.9 ounces) - there are about 500,000 of them, each worth in the region of £350,000.

But the official reserves of the UK Treasury account for less than a tenth of this.

"Just 310 tonnes of the gold in the Bank of England is from the UK Treasury, the rest is mostly commercial," says Adrian Ash of BullionVault.com.

The gold is held in a system of eight vaults over two floors under Threadneedle Street in the City. This is to spread the weight and prevent the vaults from sinking into the London clay beneath the bank.

There are six smaller commercial vaults inside the M25, owned by banks like JP Morgan and HSBC. Three are around Heathrow Airport.

The vault bought by ICBC from Barclays is one of these vaults within the M25, but its exact location is secret. It holds 2,000 tonnes, making it one of the largest in Europe. It is reported to have taken a year to build.

Image copyright Getty Images

According to Adrian Ash, a host of private concerns hold gold in London's vaults. "It will be investment funds, hedge funds, wealthy families, trust funds that are backed by gold, that kind of thing," he says.

The Bank of England's vault is the second largest in the world behind only that of the New York Federal Reserve, which holds about 6,300 tonnes.

"London is interesting as it doesn't produce gold or refine it, nor is there much consumer interest. However, it is the centre of the wholesale gold market. It's the fourth-largest importer of gold and the second largest exporter. When you request a price of gold it is given as 'Loco London' - the price of gold delivery in London, which is the baseline," says Ash.

"This is because the UK time zone is between Asia and the US, it has a historic connection to the gold standard and a strong history of property rights, political stability and free trade. It also has good vault facilities."

The Barclays vault bought by ICBC is not thought to have been emptied before the sale.

"My understanding is that it's being bought as a going concern, they haven't just taken over an empty vault," says Ash.

The investors, jewellers, mining companies and others storing their gold in vaults such as these will now pay pay ICBC instead of Barclays for the privilege.

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