ONE of the largest hoards of gold ever gathered outside a central bank has been accumulated at a secret address in London over the past few months.

Gold bars with a value of £1.55 billion are understood to have been collected in a single vault in an anonymous building owned by HSBC. If melted into a single block, the 212 tonnes of solid gold would take up 11 cubic metres — roughly the size of a Transit Van.

But the gold is so dense that it would require 104 Transit Vans to cart it away. The quantity of metal is 21 times the amount stolen in the Brinks-Mat robbery in 1983.

Ironically, the reason for the accumulation of this hoard is the popularity of a new gold investment product that does away with the expense, risk and hassle of taking delivery of the metal.

People and institutions in Britain, the US and Australia have been queueing to buy gold-backed, exchange-traded funds (ETF) — listed shares tradeable on the stock exchange but backed by actual gold.

Gold Bullion Securities (GBS), the British and Australian ETF that listed in London in December 2003, has 60 tonnes of gold in the vault — a 30 per cent increase in the past four months. StreetTRACKS, its sister ETF in the US, which was launched in November, is now backed by 152 tonnes of gold deposited in the same vault.

Both ETFs are supported by the World Gold Council, the marketing body for the goldmining industry.

Simon Village, joint managing director of GBS, said: “Exchange-traded gold has very quickly become an important investment vehicle for investors seeking exposure to the metal or seeking to diversify their holdings in other assets.”

In the past 12 months, 7.5 per cent of the world’s goldmine production had gone into ETF products, Mr Village said.

Barclays yesterday launched a rival gold-backed ETF on Wall Street using Bank of Nova Scotia as custodian.

Gold-backed ETFs closely track the physical gold price, less a small commission for administration and gold storage costs. Additional securities are created or old ones redeemed so that supply matches demand.

Most of the demand has come from institutional investors. Strong publicity for the streetTRACKS product in the US has boosted demand, as has the slide in the gold price during the past few weeks, which some investors see as a buying opportunity.

The gold stockpile in London is said to be secure. But it is not clear what would happen in the unlikely event that the hoard was stolen.

GBS does not insure the gold and said it is HSBC’s responsibility to keep it safe. Investors might have to rely on a claim against the bank in the unlikely event of a robbery, GBS said.

HSBC is under no obligation to insure the gold. But the bank said it would be responsible for any gold lost through its negligence, fraud or wilful deceit.