S'pore has key features to become Asia-Pac's global precious metals trading hub

Singapore is in a good position to reprise its role as the region's global precious metals trading hub, but there is still some way to go, said Singapore Bullion Market Association (SBMA) chief executive Albert Cheng.

The Singapore Exchange's Singapore Kilobar Gold Contract, for instance, has suffered from low trading volumes since it was launched in 2014.

Mr Cheng noted this is partly due to the stringent requirements for customers to set up an account with the clearing house, compared with the traditional over-the-counter (OTC) method of trading.

"Moving OTC trade to exchange trade is a (good) direction, but it is not happening fast enough," he said at a briefing yesterday. He noted that exchange trading is safer and more transparent than OTC trading.

"We're among the early batch of countries trying to adopt this, and maybe we're a little bit ahead of the curve. But if the wind blows in this direction, we will be at an advantageous position," Mr Cheng said, adding that one of the avenues for change is for the market, as a whole, to look for more transparency in trading.

Still, Mr Cheng believes Singapore has the key features in place to become Asia Pacific's global precious metals trading hub, given its strong financial, as well as precious metals storage and trading infrastructure.

Mr Lester Lu, divisional director for metals and minerals of the trade promotion group at IE Singapore, said that Singapore lost its status as a physical gold distribution centre when the goods and services tax (GST) was introduced in 1994. But he added that activity has been steadily picking up in recent years.

Annual gold volume traded here has grown from 911 tonnes in 2012 to 2,624 tonnes in 2015, thanks to a number of initiatives. These include the Government exempting the trading of investment-grade precious metals from GST in 2012, while storage facilities, such as the Singapore FreePort vault next to Changi Airport, increased.

The physical movement of gold arranged from Singapore rose 65 per cent to more than 200 tonnes between 2014 and 2015.

To further promote Singapore as a precious metals trading hub, the SBMA, supported by IE Singapore, is organising the inaugural Asia Pacific Precious Metals Conference in June.

Gold prices grew about 8 per cent last year amid heightened global uncertainty. It hit the highest in five months this week, with spot gold at about US$1,273 per ounce yesterday.

Phillip Futures analyst Jonathan Chan said investors have been turning to safe-haven assets like gold, as opposed to riskier assets, in the light of rising concern over a number of geopolitical events. "Gold prices may continue to rise if these factors continue to escalate or weigh even more heavily on investors' minds."

A version of this article appeared in the print edition of The Straits Times on April 13, 2017, with the headline 'S'pore has key features to become Asia-Pac's global precious metals trading hub'. Print Edition | Subscribe