Rising demand for gold that has sent prices to a nine-year high will boost Singapore's export outlook.
The precious metal has, for most of this year, bolstered non-oil domestic exports (Nodx) against the coronavirus-induced collapse in global demand for goods.
Gold spot prices rose above US$1,800 an ounce on Wednesday, a day after inflows into exchange-traded funds (ETFs) - mostly in North America and Europe - surpassed the annual record set in 2009.
Most ETFs track the London Bullion Market Association PM gold price and keep the physical metal in the form of London Good Delivery bars. So, as more ETF units are sold, the funds have to increase the amount of the bars in physical gold.
ETFs tracking the metal have accumulated an additional 655.6 tons of gold so far this year, according to estimates compiled by Bloomberg.
Gold ETF holdings stand at 3,234.6 tons.
That increase in physical holdings by funds translated into demand for the precious metal held in Singapore vaults. Enterprise Singapore said non-monetary gold exports accounted for about 70 per cent of the growth in March's Nodx.
The increase in the allure of gold also helped the stock market here by boosting turnover in a period when most investors were staying away from new investments.
Singapore Exchange data showed that SPDR Gold Shares were the most traded ETFs in the first six months of this year, and also topped other ETFs in one-and three-year total return - a key valuation for investment decisions.
It is not surprising to see gold glowing brighter amid a crisis but the shift in the source of demand from the East to the West is adding to the bullish outlook.
Gold has always been viewed by investors as a store of value and a safe haven from market turmoil.
When a recession hits and central banks go on a rate-cut overdrive, a large part of the usual low-risk bond market becomes worthless in terms of yield. Gold becomes the preferred alternative investment for risk-averse investors who still want to get a return.
Bullion ETFs also provide a compliance shield for some institutional investors such as pension funds and insurance companies that are not allowed to hold physical gold.
However, the recession caused by the pandemic has been different in many ways from the usual business-cycle slumps.
As countries went into lockdown, retail sales of all discretionary items collapsed.
Sales of jewellery, a major source of gold demand that made Asia the top consumer of the yellow metal, was no exception.
But at the same time, big investors in North America and Europe started to move into gold ETFs.
Fear-driven investment demand in developed countries has contributed about 18 per cent to this year's gain in gold prices. Meanwhile, weaker buying by emerging-market consumers resulted in an 8 per cent drag, Goldman Sachs estimated in a research note last month.
Even as the lockdowns were being eased, fear of livelihoods persisted and have so far weighed down discretionary buying in major gold consumer markets such as China and India.
Still, safe haven and yield demand for gold in Europe and North America is set to leap even higher.
Goldman Sachs, for instance, set a 12-month price target of US$2,000 for gold last month, noting that investment demand will likely continue to grow, even as the economy recovers.
The bet is that while most economies will recover by the end of the year, major central banks will keep interest rates lower for longer to maintain solvency of companies battered by the Covid-19 crisis.
Meanwhile, as Asians gain more confidence in the stability of their jobs, they will resume discretionary purchases including of gold jewellery.
As the two trends converge later this year, gold is likely to trade at a higher price.
The higher gold demand may further boost bullion exports from Singapore.
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