Deutsche Bank sets up bullion vault in London

LONDON (Reuters) - Deutsche Bank (DBKGn.DE) said on Monday it begun operating a precious metals vault in London, joining a series of other institutions that offer to store gold in the global centre of the over-the-counter bullion market.

The vault has a capacity of 1,500 tonnes, making it significantly bigger than a 200-tonne storage facility that the bank owns at the Singapore Freeport. Other vaults are in Hong Kong, Zurich and New York.

The bank announced it would open a London vault in March 2012, when gold prices stood around $1,590 an ounce and investment demand was growing.

Prices however dropped 28 percent in 2013, following 12 straight years of annual gains and are currently close to four-month lows around $1,256 an ounce, as optimism about the global economy has encouraged investors to rotate towards more cyclical and riskier assets such as equities.

Holdings of exchange-traded funds, which issue securities backed by physical gold and had proved a popular way to invest in bullion since their inception in 2003, fell around 750 tonnes last year and by more than 50 tonnes so far this year, according to Reuters data.

But demand for bars and coins rose 31 percent to 1,780.60 tonnes in 2013, according to the World Gold Council, mostly due to increased buying in price-sensitive Asian countries.

Deutsche's new vault has been built in partnership with logistics company G4S (GFS.L) and is open to institutional investors, and commercial and central banks.

Deutsche Bank, one of the six clearing members of the London Bullion Market Association, joins HSBC, JPMorgan, Barclays and others, which all have precious metals vaults in London.

(Reporting By Clara Denina, editing by David Evans)