Singapore to start gold contract as world demand shifts to Asia
City introduces gold contract as it competes with China to boost trading presence as centre for consumption of the metal shifts towards Asia
Singapore Exchange, Southeast Asia's biggest bourse operator, will introduce a wholesale kilobar gold contract as the city state seeks to increase its share of the US$18 trillion industry.
The contract for 25kg of 99.99 per cent purity may start as soon as September, according to a joint statement from the exchange, the World Gold Council, the government's trade-promotion body and the Singapore Bullion Market Association.
Singapore is vying with China to boost its presence in physical bullion trading as the industry discusses changes to the century-old fixing benchmark in London and global demand shifts east. Asia accounted for 63 per cent of total consumption of gold jewellery, bars and coins last year, up from 57 per cent in 2010, according to the council, which plans to hold a meeting next month on changes to the fixing.
It makes sense that the centre of [physical] price discovery … moves [to Asia]
"The centre of the world for gold consumption is Asia, so it makes sense that the centre of price discovery for the physical market moves that way," said Victor Thianpiriya, an analyst at Australia & New Zealand Banking Group.
The Singapore government is promoting the city state as a centre for precious metals after removing the 7 per cent goods and services tax on investment-grade gold, silver and platinum in October 2012.
After the change, the trade in gold in Singapore rose 94 per cent to S$35 billion (HK$217 billion) in 2013 from a year earlier, the groups said in the statement.
"This is a timely development given the increased requirements for reference prices to be transparent," Trade and Industry Minister Lim Hng Kiang said in a speech at the London Bullion Market Association's conference in Singapore yesterday.