Business is booming at a local vault, especially in IRAs

Holding a 28-pound bar of gold worth $400,000 - as much as the average cost of a house in Chestnut Hill - one can't help but smile.

And that's just one. Imagine within reach a pallet of gleaming gold bricks worth $20 million.

In a virtually impregnable local vault, a precious-metals-trading company holds more than a billion dollars worth of gold, silver, platinum and palladium.

The titillating run-up in the price of gold to a record $1,009 an ounce in New York trading yesterday has business booming at FideliTrade Inc., with buying and selling up tenfold over the last two years, company officials said.

"This part is glamorous," FideliTrade Inc. managing director Jonathan E. Potts said while pointing to a stack of gold bars, "but what we really do is record-keeping."

The privately held company, which used to be part of Wilmington Trust Corp., benefits from soaring metals prices because its percentage-based commissions get bigger as the price goes up and more people want to buy.

Potts declined to disclose the exact value of the precious metals FideliTrade oversees. He did not want the company's locations publicized, not because he is worried about a professional thief stealing gold. He worries about futile robbery attempts by hacks off the street.

The basement vault is partially underground and is inside a building - whose cinderblocks are filled with concrete and steel - inside yet another building. The concrete and steel floor is four feet thick, Potts said.

The biggest part of FideliTrade's business is serving institutions, such as banks and brokerages. When a consumer goes to her bank or broker to buy an ounce of gold, FideliTrade might jump into action.

The company would get the order and might move an ounce of gold to the area of the vault designated for all the customers of a particular bank or brokerage.

The company also has an area where it keeps individual customers' holdings. "Some retail customers want the same exact molecules back," Potts said.

In the case of a 1,000-ounce bar of silver, worth about $20,000, the bar probably would not move. Each bar has unique identifiers, which means FideliTrade just keeps track of who owns it and where it is.

Similarly, 50-ounce squares of platinum underlying futures contracts on the New York Mercantile Exchange sit in company vaults and rarely move.

Each silvery platinum square, slightly smaller than a CD case, was worth more than $100,000 yesterday - twice as much as gold, but with none of the emotional allure of gold in your hands.

Potts said FideliTrade has three things to keep safe: the gold and other metals, the money used to buy them, and the records of who owns what.

FideliTrade management is acutely aware that the biggest bank thefts occur on paper. To reduce that risk, all the paperwork is done by pairs of employees and double-checked by management.

The company makes a video record of the packing of each shipment that goes out and of the unpacking of each package it receives, to deal with the problem of customers' saying that they didn't get the number of gold coins they ordered or that they sent in more than they did.

The gold itself is the easiest thing to keep safe. Seven interlocking bullet-proof doors separate the gold vault from the street. That means you have to wait for door to close before the next one will open.

None of FideliTrade's owners has the entire combination to vault, the company's office workers are not allowed in the vault at all, and employees always work in pairs.

"The person who wanders off by himself is the No. 1 suspect" if something goes missing, Potts said.

The company conducts random and continuous audits of inventory. "Just because we counted [American Gold] Eagles today," Potts said, "doesn't mean we won't count them tomorrow, too."

One the fastest-growing parts of FideliTrade's business is storing gold held in individual retirement accounts. Potts said he has an idea why investors have been clamoring for gold. "It's because people are afraid. They are afraid of the economy," Potts said. "It's a flight to quality and a flight to a safe haven."