Singapore pushes to become regional gold hub as demand for bullion rises
Industry players say interest in storing gold in Singapore is rising among investors from markets such as India, Indonesia and Vietnam, drawn by the country’s reputation for stability, security and strong governance.
Singapore’s private vault operators collectively store billions of dollars’ worth of precious metals for clients around the world.
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SINGAPORE: Singapore is looking to position itself as a regional hub for gold trading and storage, as demand for bullion grows across Asia.
Industry players say interest in storing gold in the country is rising among investors and institutions from markets such as India, Indonesia and Vietnam, drawn by its reputation for stability, security and strong governance.
Singapore is also targeting central banks seeking alternative locations to store and trade gold as they reassess their reserve strategies amid growing geopolitical uncertainty.
SAFE HAVEN APPEAL
Observers say Singapore could offer Asian central banks a trusted regional alternative to traditional storage centres in Europe and the United States, but clearer regulations will be needed to support secure transactions and further growth in the sector.
“With the intensification of geopolitical tensions around the world in recent years, a lot of central banks are really thinking about what jurisdiction might suit them best (to) place one of their most important national reserves,” said Mr Shaokai Fan, global head of central banks and head of Asia-Pacific (excluding China) at the World Gold Council.
“I think Singapore’s rule of law, its relative neutrality in terms of world affairs, makes it a very attractive place,” he added.
Mr Fan said if central banks choose to store gold in Singapore, they may also begin buying and trading bullion here, helping to deepen the local market and “amplify the visibility of Singapore’s gold trading capabilities”.
“It can also serve as a sort of foundation of liquidity,” he added. “If these foreign central banks want to trade their gold more actively when it’s moved to Singapore, then that gold can be circulated in the market.”
Singapore’s private vault operators collectively store billions of dollars’ worth of precious metals for clients around the world.
“People are looking for a safe haven asset because the world is becoming less and less predictable,” said Mr Gregor Gregersen, founder of bullion vault operator The Safe House Singapore.
“Our clients don’t view it as an investment. They view it as long-term wealth protection and that’s essentially what we are – a backup plan, safety – in a world which is becoming less certain.”
The Safe House stores about S$4 billion (US$3 billion) worth of gross metals, with most of its customers coming from Europe, Australia and the US.
It has also invested in technology to improve the security of stored assets.
“If you move things in and out, you just have to make sure that the bullion ends up arriving where it needs to go,” said Mr Gregersen.
Long-term storage could be supported by proof-of-reserve systems that allow owners to verify the presence of their gold and improve transparency, he added.
LEGAL CERTAINTY NEEDED
Some of the world’s largest gold vaults are operated by the Federal Reserve Bank of New York – which holds around 6,000 tonnes of gold and at one point stored as much as 12,000 tonnes – and the Bank of England, which holds about 5,000 tonnes.
“The world is undergoing significant change now, so we might see central bank gold start to move to somewhere else,” said Mr Fan.
While Singapore may not be able to match those storage capacities, industry players say establishing clear rules on ownership and access will be key to attracting deposits.
Mr Fan said issues surrounding jurisdiction and the legal ownership of gold have become increasingly important in recent years.
He pointed to the long-running dispute involving Venezuelan gold held at the Bank of England as an example of the challenges that can arise.
“The Venezuelan government has been trying to move its gold out of the Bank of England for some time, but because of non-recognition of the Maduro regime by the UK government, that has sort of held up the movement of this gold,” he noted.
“So I think one thing that Singapore should seek a little bit more clarity on is what happens when there are disputes on who’s the legitimate owner of the central bank gold.”
Industry players say custody arrangements in major trading centres also make gold more useful within the financial system.
“The reason why people have to put their gold in custody is if you put your gold … under your mattress, (it is) not usable because it’s separate from the financial system,” said Mr Albert Cheng, CEO of the Singapore Bullion Market Association.
“If you put it in a trading centre, a settlement centre, and store it there, in case you want to use the gold as a pledge to other financial market activity, it’s easily accessible to a trading market.”
To grow the bullion market, the Monetary Authority of Singapore is working with industry players to develop gold investment products and establish a clearing system to support gold trading.
Source: CNA/ca(lt)
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