Asia's Singapore Aims To Become A Major Global Gold Trading Hub - Launching New Gold Trading Contracts

Today’s AM fix was USD 1,312.00, EUR 964.42 and GBP 773.22 per ounce.
Yesterday’s AM fix was USD 1,323.00, EUR 971.44 and GBP 778.51  per ounce.  

Gold rose $3 or 0.11% yesterday to $1,317.50 per ounce and silver rose $0.04 or 0.19% to $20.92 per ounce.

Singapore is taking steps to become a major international trading hub for gold trading and logistics with the launch in September of a new 25 Kilo bar gold trading contract.

With Asian demand set to remain strong into the future Singapore is capitalising on its recent successes spurred on by its removal in October 2012 of 7% good and services tax on gold, silver and platinum. Asia share of total global demand for gold jewellery, bars and coins jumped from 57% in 2010 to 63% in 2013.

In fact there has been a steady and strong stream of exports from many European gold centres to Asia over the last 18 months with massive withdrawals seen in London, Geneva and Zurich. GoldCore have seen strong demand for storage in Singapore this year from clients across the spectrum.

The global gold market this year is in a massive state of flux as traditional trading centres have begun to lose the faith of market participants. International banks have been caught time and time again exerting undue influence over major market benchmarks. From Libor Interest rates, to global currency trading, to gold market pricing mechanisms, powerful banks are now being further scrutinised over possible market manipulations.

The gold market is reeling this year from allegations that many banks have been profiting unfairly from the London gold fix, a mechanism which is increasingly seen as lacking in transparency and thus open to abuse.

At a conference organised by the London Bullion Market Association, Singapore's Trade Minister Lim stated plainly "This is a timely development given the increased requirements for reference prices to be transparent. What the bullion industry needs most is a vibrant and robust marketplace within the heart of Asia. With our close proximity to both demand and supply in Asia, I believe that Singapore is well-placed to support the bullion industry.”

It would seem that as the demand for gold moves east so too will the financial infrastructure needed to manage the demand, supply and logistical market equations.

Oil and Gold - A Love Affair
Oil and gold have been in a long term relationship with each other, and as like most relationships it has been both blissful and at times a stormy affair. Gold, the ultimate canary in the global economic coal mine had been screaming on high for the years leading into the global economic crisis of 2007 and 2008, reaching a pinnacle in 2011. Interestingly the oil price moved in lock step (for the most part) with gold too.

The attached chart shows the price performance of both, gold moving up 327% in the last 10 years and oil rising 363%. Why would this be? At first glance the the market fundamentals are quite different, one is a de-facto currency and the other is representation of energy demand, supply and economic development.

In many ways oil and gold confirm the trend of integration, growth and change in the global economy. They also too suggest that currencies have been debased, and massively so. Have oil and gold risen or have the world's currencies been debased? The world is now awash in cash, much of it newly printed.

Gold looks, on an historic basis, to be undervalued relative to oil. The recent price performance may be short term overbought, but in the medium to longer term gold may rally strongly, perhaps even rising to $1,800 to $1,900/oz. The relationship may be about blossom again.

Mark O'Byrne is on vacation this week. Stephen Flood is covering.