(REUTERS) -- Germany's Deutsche Bank said on Tuesday it had hired global security firm G4S to build and manage a new precious metals vault, as it seeks to cash in on booming investor demand for physical gold and silver.

This is a key step in Deutsche Bank's on-going efforts to build our physical presence in commodities. We know that clients are looking to diversify where they place their physical holdings, Raymond Key, Global Head of Metals Trading at Deutsche Bank said in a joint statement with G4S.

A source close to the deal told Reuters that the vault would be built in London, centre of the global bullion market, where vault space is running low even as the growth in exchange-traded funds backed by physical precious metals has led to a steep rise in demand for vaults.

A growing number of banks and logistics companies are rushing to break into the market. Britain's G4S, the world's largest security firm, said it had signed a 10-year commercial agreement with Deutsche Bank, having begun discussions in 2009 when economic volatility caused interest levels among investors for precious metals to rise.

No value for the agreement was given.