Singapore is set to usurp London and New York as the world’s gold hub as the yellow metal shifts from West to East.

According to the World Gold Council head of Asia-Pacific and global head of central banks Shaokai Fan, the “center of gravity” of the gold market has shifted to the East. Gold consumption by emerging market economies is rapidly rising and the majority are concentrated in Asia. Singapore’s proximity to this growing market sets the city up to become the “fulcrum of this new balance.”

“Singapore is poised to lead the gold market in the future,” Fan said at the Asia Pacific Precious Metals Conference

Singapore is also close to 25 percent of the world’s gold mining supply. China, Australia, Indonesia, the Philippines, Papua New Guinea, and Laos are all significant gold producers.

Fan said there is a need for an official gold reserve center in the East, especially with growing concern over geopolitical tensions and the West’s propensity to use economic sanctions as a weapon. This makes some countries wary of storing their gold in New York or London where it could be frozen or seized if their governments raise the ire of Western leaders. Fan said Singapore could become a “truly viable alternative” to those cities as a hub for gold vaulting.

Singapore has a stable government and a friendly tax environment. Fan said it has also taken several steps that increase its attractiveness as a gold hub including tax reforms.

“The removal of GST on investment gold in Singapore, the establishment of good delivery refineries here have bolstered Singapore as a leading hub for gold trading.”

The Asian Gold rush

Asians have been gobbling up gold despite prices at record levels in many currencies. As a recent Reuters report noted, price sensitivity has all but disappeared in many Asian markets.

Interestingly, the article originated in – Singapore.

According to the report, Asian buyers are snapping up gold “to hedge against geopolitical and economic uncertainty.” The report also cites lower confidence in other investment options including real estate and equities

"The trend in the market has been that if the consumer wants to buy gold, they will. The price doesn't matter," Singapore Bullion Market Association CEO Albert Cheng told Reuters.

Demand for gold coins and bars surged 27 percent in China during the first quarter despite record-high prices in yuan terms. China is dealing with high price inflation and a deteriorating real estate market. Trade tensions have also made Chinese investors wary.

China consistently ranks as the world’s leading gold consumer, but surging demand isn’t isolated to that country.

According to Japan Bullion Market Association chief director Bruce Ikemizu, there are more gold bulls than bears in Japan, despite record-high prices in yen terms.

MTS Gold Group CEO Nuttapong Hirunyasiri told Reuters customers lined up outside stores in Thailand to buy gold when headlines reporting higher prices hit the news.

South Koreans have also caught the gold bug. Korea’s largest convenience store chain, CU, recently teamed up with Korea Minting and Security Printing Corporation (KOMSCO) to offer customers fingernail-sized gold bars. CU reported that it had sold 60 percent of its inventory within the first three weeks.

Demand for the small bars dovetails with a more general trend of increased gold demand in Korea. According to the World Gold Council, demand for gold coins and bars increased by 27 percent year-on-year in the first quarter of 2024.

The product is similar to gold beans popular in China.

And in Vietnam, investors queued up at banks when the government released gold for sale to the public in an effort to push down record prices in dong terms.

India ranks as the world’s second-largest gold consumer. Buyers there have been more price sensitive, but even with record prices in rupee terms, Indian gold demand rebounded during an important May festival.

Meanwhile, gold demand has remained tepid in the West.

According to the World Gold Council, profit-taking by Western investors in the first quarter of 2024 contrasted with largely one-way investment demand in Asia. Bar and coin demand in China surged by 68 percent year-on-year to 110 tons. Gold bar and coin investment in India jumped by 19 percent year-on-year. Meanwhile, physical gold demand fell modestly in U.S. and European markets.

The rise of Singapore as a gold hub makes sense in the context of this shift of gold from West to East.

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