Singapore aims to bolster position in global gold market with new services

The Monetary Authority of Singapore launched a gold vaulting service on Tuesday, specifically for foreign central banks and sovereign entities, initially offering a capacity of 500 metric tons.

Alongside this, the nation plans to implement tax exemptions for wholesale gold-related activities, including vaulting, refining, recasting, testing, and broking. Earlier this year, Singapore announced plans for a physical gold clearing system slated to begin operations in the first quarter of 2027.

These initiatives represent Singapore’s latest attempt to establish itself as a key bullion hub, competing with established centers like London and Switzerland as gold trading increasingly shifts towards Asia.

However, challenging established markets presents obstacles. London currently holds approximately 9,850 metric tons of gold, encompassing both commercial and central bank storage.

Singapore’s efforts are occurring alongside Hong Kong’s expansion of gold storage and clearing infrastructure, leveraging its proximity to China, the world’s largest gold market.

“Singapore is late to the game, as a physical hub requires substantial trade volume,” stated Juerg Kiener, chief investment officer at Swiss Asia Capital. “The largest gold market is China, and Hong Kong serves as its gateway to the world. Singapore isn’t ideally positioned to compete with Hong Kong in gold-backed trade.”

Kiener suggested Singapore could specialize in physical gold storage for financial institutions. Commercial vaulting services are already available in Singapore, including at the Changi Airport Freeport.

The new facility, operated by Singapore’s central bank, offers foreign monetary authorities an alternative for gold custody.

“This is an uncommon occurrence in the gold market or within the central bank community,” commented Shaokai Fan, global head of central banks at the World Gold Council.

Fan noted that geopolitical tensions are prompting central banks to reassess their gold storage locations, with a World Gold Council report in September highlighting diversification efforts.

Singapore’s political stability, robust legal framework, and extensive air connectivity may make it an attractive alternative to traditional storage locations, according to Nikolas Kavalis, managing director at Metals Focus. However, he cautioned that storage alone isn’t enough to create a fully functioning bullion market.

Both Singapore and Hong Kong are still developing their clearing infrastructure, meaning neither has yet established a deep trading ecosystem comparable to London’s. Attracting central bank gold could help Singapore build that liquidity, especially if the stored bullion can be used for transactions.

Historically, gold flowed primarily through London and Switzerland, but the growth of Asian refineries and regional demand has shifted gold movement directly between Asian markets.

While Hong Kong may have an advantage in serving institutions linked to China, Singapore could appeal to those already active in its financial markets, Kavalis added.

Fan believes both centers can grow, and Singapore’s Deputy Prime Minister Gan Kim Yong echoed this sentiment, stating that it’s “not a zero-sum game.”

Whether Singapore can convert its reputation as a reliable financial center into substantial bullion flows remains to be seen. “It’s a cyclical challenge: attracting volume requires liquidity, but gaining liquidity necessitates volume,” Fan concluded.