Citigroup’s Gold Bullion Plan Shows High Prices Are Here to Stay

Nothing says gold is hot quite like a story that big US banks are considering getting back into the business of holding other people’s bullion.

I did a double take as my first instinct was that I’d picked up a story from the 1970s. But knowing how good my Bloomberg News colleagues are, and having spoken with several sources, it's very much a real thing. Citigroup Inc. is eager to get back into an activity it probably should never have left, and several other major institutions are leaning the same way. It costs a lot to store gold. The logistics, let alone the security, are mind-bogglingly expensive.

Here’s the skeptic’s take, courtesy of Warren Buffett: “Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility.” But not everyone shares his view that “it won’t do anything between now and the end of time except look at you.” Clients increasingly want to hold gold as a portfolio hedge, so banks are responding with old-fashioned customer service and commensurate fat fees.