The US bank becomes an additional custodian for the world's largest gold ETF. Some of the gold bars will also be stored in Zurich.

The gold vaults at JP Morgan will soon be filled. The US bank will act as a custodian for the world's largest gold ETF SPDR Gold Trust (GLD), a huge coup for the gold department of the company led by Jamie Dimon.

By becoming another custodian for the ETF, it ends a competitor's sole lock the roughly $50 billion in gold bullion holdings.

Together Instead of Alone

Since the launch of the world's largest gold ETF in 2004, HSBC has been the sole custodian and currently stores about 910 tons of GLD gold in London. Bloomberg estimates the investment vehicle accounts for about one-third of all physical gold held by ETFs worldwide.

The custody which begins December 6, is a boon for JP Morgan since it could earn millions of dollars in storage fees.

Gold Comes to Zurich

The World Gold Council (WGC), which manages the gold ETF, is looking to diversify its warehousing. Having JP Morgan will change the current operating model of having only one custodian and vault to accommodate the fund's activity as it anticipates of future growth, said Joe Cavatoni, WGC's Global Head of Sales & Regional Head of US, according to media reports.

He added the WGC would try to funnel gold to JP Morgan by sending new metal to the fund and held out the prospect of an even split between the two banks.

The gold held by GLD has so far been stored solely in HSBC's London vault. In the future, in addition to London, gold will be held in vaults in New York and Zurich.

Largest Bullion Banks

JP Morgan and HSBC are the world's two largest bullion banks, and their businesses range from futures trading to shipping physical gold around the world.

Bullion banks are responsible for clearing, hedging, trading, and storing precious metals in bulk, as well as selling them. They likewise act as custodians for the largest gold exchange-traded funds.

Weak Dollar Boost

On the gold market, prices for the yellow precious metal trended significantly upward again in November. The prospect of the US Federal Reserve is likely to slow down the pace of interest rate increases lent support along with a weakening dollar.

After a dry spell of around seven months, gold is currently trading at just under $1,800 per troy once, its highest level since mid-August.