The rising demand for gold and Singapore’s value proposition

Asia is the driver of the rising demand for gold globally. Asian demand for jewellery and investment totalled 2,015.4 tonnes in 2016, or 67% of global demand. Asia does not only comprise gold importing nations, but also includes countries that export gold as scrap or by-products of mining. According to Metals Focus, 52.4% of the world’s scrap gold comes from Asia, and 16.2% of the world mining supply of gold comes from Southeast Asia and the Pacific.

Additionally, there is increasing investor interest to store gold in Singapore, which offers a neutral and alternate location for them to store their wealth. With its world-class physical infrastructure, Singapore is well placed to accommodate this demand. Its innate attributes of neutrality, economic and political stability, excellent connectivity and reputation as an important financial centre have long appealed to global investors. In addition, Singapore has a strong, efficient and transparent legal and judicial framework, as well as a strong rule of law. According to the Monetary Authority of Singapore, the country has the largest pool of assets under management in Asia, with $2.6 trillion in 2015.

The physical allocation of gold in investment portfolios has been growing in Singapore, which has led to a growth in the number of companies setting up bullion operations in Singapore. Using the country as a base, they are able to leverage its infrastructure and geographical location to expand into Asia Pacific markets, and benefit from the lack of foreign exchange and capital restrictions, as well as the availability of several tax incentives.

Economic overview

Singapore is a hub for logistics and finance in Southeast Asia and transacts very large imports and exports compared to the size of its own economy (Table 1). As a result, domestic economic trends are often influenced by broader economic and currency trends. Singapore also has very close connections with the Chinese economy through its extensive overseas network.

Table 1: Key Figures  

Population5.7 million
Economic Growth0.7%
ExportsUS$439 billion
ImportsUS$342 billion
Foreign ReservesUS$279 billion
External DebtUS$1,594 billion

Source: Focus Economics, MAS, SingStat

History of the Singapore precious metals market

Since the 1960s, Singapore has been a gold distribution centre for Southeast Asia, with its gold largely sourced from London and Zurich. In 1969, in the wake of a global evolution of the free gold market and a two-tier price structure following the collapse of the London Gold Pool, Singapore established an over-the-counter (OTC) gold market.

However, from 1969 onwards, only non-residents could perform gold transactions in Singapore, and banks and bullion dealers trading gold required authorisation from the Singapore government. Beginning in 1973, Singapore residents were finally allowed to trade gold, and the gold dealer licensing requirement was abolished.

In November 1978, a group of Singaporean bullion dealing banks and brokers formed the Gold Exchange of Singapore (GES). Founder members included United Overseas Bank (UOB), N.M. Rothschild and Overseas Chinese Banking Corporation (OCBC). GES listed two physically deliverable gold futures contracts: 100 oz and 1 kg. GES also established its own clearing house, the Singapore Gold Clearing House, whose clearing members were OCBC, UOB, Overseas Union Bank (OUB), DBS Bank and the Bank of Nova Scotia. GES gold contracts saw strong initial interest but trading volumes tailed off by 1983.

In late 1983, GES was integrated into a new financial futures market – the Singapore International Monetary Exchange (SIMEX), a collaboration between GES and the International Monetary Market (IMM), a division of the Chicago Mercantile Exchange (CME). In 1984, SIMEX launched a cash-settled 100 oz gold futures contract based on loco London prices. However, this contract also saw a gradual demise in demand and activity ceased by 1996, which led to it being phased out in 1997. SIMEX then merged with the Stock Exchange of Singapore in 1999 to form the current multi-asset Singapore Exchange (SGX).

Singapore’s role as a redistribution centre for the region reached record levels in 1992, when gold imports hit 414 tonnes (almost half of Asia’s total consumption). Since then, imports have declined as a result of market liberalisation measures adopted by some of its immediate neighbours.

Consumption by domestic jewellers had, for many years, hovered around 18–22 tonnes at saturation level. The introduction of a 3% GST in 1994 softened the demand for gold products. In 2003, GST was increased to 4% and then to 5% in 2004. In 2007, it was increased further to the current level of 7%.

The establishment of the Singapore Freeport in 2010 provided Asia with its own Fort Knox, outfitted with cutting-edge security. Located next to Singapore’s Changi International Airport, it offers 22,000 m2 of strong rooms and showrooms with direct access to the airport runway and armed guards around the clock.

Recognising that investment precious metals (IPM) are essentially financial assets like other actively traded financial instruments like stocks and bonds, and to facilitate the development of IPM refining and trading in Singapore, the government announced in early 2012 that IPM would be GST exempt from 1 October 1 2012. As a result, the volume of non-monetary gold import jumped 78% and exports increased 37% in 2013 (IE Singapore Statistics).

At the 2014 London Bullion Market Association (LBMA) Bullion Market Forum in Singapore, Singapore Trade and Industry Minister Lim Hng Kiang announced the Singapore Kilobar Gold Contract, the first wholesale 25 kilobar gold contract to be offered globally. A joint initiative of International Enterprise (IE) Singapore, World Gold Council, Singapore Exchange and Singapore Bullion Market Association (SBMA), the contract introduced centralised trading and clearing of a physically delivered gold contract in Singapore. It comprises a series of six daily contracts, which gives buyers physical access to competitively priced kilobars. This was enhanced by the launch of the ICE One-Kilo Gold Futures on 17 Nov 2015.

On 17 October 2016 at the LBMA annual conference in Singapore, SBMA announced the launch of a joint feasibility study between the SBMA, LBMA and ICE Benchmark Administration (IBA) for a LBMA Pre-AM Gold Price, to be set at 14:00 Singapore Time (06:00 GMT). This initiative was supported by IE Singapore, the government agency driving international trade, as it would catalyse the development of Singapore as a leading precious metals hub.

Developing Singapore as a global trading hub

To capitalise on the growing global demand and to leverage Singapore’s strengths, IE Singapore, the Singapore government’s trade promotion agency, began consulting the bullion industry in 2010 about transforming the country into a hub for bullion activities in Asia. The initiative would build up Singapore’s bullion refining, trading, clearing, storage and logistics capabilities to service nearby countries, which include two key demand centres – China and India – and the ASEAN region.

Singapore Bullion Market Association (SBMA) regularly offered market knowledge and advice to IE Singapore in developing the country’s bullion strategy, and later to the Inland Revenue Authority of Singapore (IRAS) and Singapore Customs during implementation. Three strategies were adopted to foster a more conducive business environment to nurture this concept, namely:

  • Goods & Services Tax (GST) exemption on investment precious metals – gold, silver and platinum, effective from 1 Oct 2012.
  • Anchoring a first-class globally accredited gold refinery – Metalor Singapore began operations on 26 Jun 2014.
  • Creating a trading marketplace that includes physical settlement, storage, secure logistics and price discovery. The SGX Kilo Gold Physical Contract and ICE Kilo Gold Futures were launched in 2014 and 2015 respectively.

A wealth of secure logistics providers, including established logistics players, such as Brink’s, Certis CISCO, G4Si, Loomis and Malca-Amit, operate the vaults in the Singapore Freeport, providing experience and expertise in precious metals handling.

The role of Singapore Bullion Market Association (SBMA)

SBMA is a non-profit organisation established in 1993 for the purposes of representing key stakeholders from the precious metals industry, including bullion banks, exchanges, refineries, bullion merchants and secure logistics companies. SBMA currently serves as the touch point between government bodies and industry participants in Singapore, playing a pivotal role in the development of Singapore as an Asian precious metals hub.

SBMA participates in many activities such as engagement with governmental agencies to influence public policy favourable to Singapore’s development, publishing market analyses, being a thought leader, offering support services and guidance to industry stakeholders, but its focus remains in ensuring collaboration between its members, integrating and harmonising the ASEAN gold market, and encouraging ASEAN bullion organisations to use Singapore as their hub for refining, trading, logistics, price discovery and risk management.

Jewellery market

The Singapore jewellery market is mixed, and there are a few categories of customers form its consumer base. Major players, such as Aspial or SK Group, have different types of shops established under their brands to cater to different categories of customers. Middle-class consumers typically purchase mid-priced products from regular jewellery stores or goldsmiths, as well as through online platforms. Middle-class consumers form a larger base than high-end jewellery buyers, but the latter buy jewellery not just as accessories but also look for investment value in the jewellery that they choose to buy. Without a doubt, both classes are equally important to the jewellery market in Singapore.

Regulatory bodies

  • International Enterprise (IE) Singapore – Gold spot trading
  • Monetary Authority of Singapore (MAS) – Exchange trade and derivative trade
  • Inland Revenue Authority of Singapore – GST

Gold Import and export statistics

Singapore market chart

HS code for non-monetary gold

HS71081210: Non-monetary gold in lumps ingots or cast bars
HS71081290: Non-monetary gold in other unwrought forms
HS 71081300: Non-monetary gold in semi-manufactured forms