S’pore opens national currency vault to foreign central banks to store gold reserves

Deputy Prime Minister Gan Kim Yong says some foreign central banks have already expressed interest in the central bank’s gold vaulting service. (ST PHOTO: GIN TAY)

Source: The Straits Times

The Monetary Authority of Singapore (MAS) on Nov 10 launched a gold vaulting service that allows foreign central banks, international financial institutions and sovereign entities to hold their gold reserves in the Republic.

The gold will be stored in MAS’ national currency vault, which can currently hold up to 500 tonnes of the precious metal, with room to expand as demand grows.

The service will complement Singapore’s commercial vaulting capacity of more than 2,000 tonnes, which serves market participants such as bullion banks, institutional investors and high-net-worth individuals.

“Given an increasingly uncertain external environment, demand for gold as an asset class is rising, as investors and central banks look for resilience and diversification,” said Deputy Prime Minister and MAS chairman Gan Kim Yong, who first announced the gold vaulting service in June.

Gan, speaking to the media at the MAS Building on Nov 10, noted that some foreign central banks had already expressed interest in the gold vaulting service, but he did not name the institutions as the discussions were confidential.

When asked what differentiates Singapore from Hong Kong, which has also stepped up its initiatives focusing on the gold market, he said that “it’s not a zero-sum game”.

He added: “What Singapore is doing is to offer an additional option to the central banks which are interested in looking for alternative venues to store their gold reserves.

“Singapore has always been a financial hub, and we have built up very strong credibility among the financial institutions, as well as with our fellow central banks.

“I think we are in a strong position to be able to serve these central banks’ needs, and we look forward to working with them.”

Without naming the banks, MAS said gold custody accounts will be offered to a select group of Singapore-based bullion banks which have “expertise and experience in providing gold-related services and trading liquidity” to foreign central banks, international financial institutions and sovereign entities.

The service is expected to support market activity during Asian hours, as gold trading, liquidity and price discovery are currently concentrated in global centres such as London and New York.

MAS said that industry testing of the Singapore Exchange’s (SGX) over-the-counter gold-clearing system has been completed, with a rule book for the system to be finalised soon.

Six banks – DBS, Deutsche Bank, ICBC Standard Bank, JPMorgan, OCBC and UOB – have been selected to participate as clearing members and help develop the local gold market.

SGX and the banks are working together to complete preparations for the system by the end of 2026, with live trading and market operations expected to commence in the first quarter of 2027, MAS added.

The clearing system will support over-the-counter trades of large gold bars and kilobars.

Large bars refer to 400 troy ounce, or about 12.4kg, in gold bars – the standard for institutional trading and settlement in London.

The kilobar, weighing 1kg, is the preferred standard in Asian markets and is accepted for delivery in Comex (Commodity Exchange) gold futures contracts in the United States.

Separately, MAS said SGX’s physically deliverable gold futures contract, Gold Kilobar Futures, is targeted to be launched in the second quarter of 2027.

Meanwhile, MAS and the Ministry of Finance will introduce an enhanced GST framework to support wholesale investment precious metals gold market activities in Singapore.

Under the initiative, GST will not be charged on select services between institutional participants, such as voting, refining, recasting, assaying and broking.

MAS said the move will support the growth of wholesale gold market activities in Singapore, where the gold is not for domestic consumption.

The framework is expected to take effect from April 2027, with further details to be provided at Budget 2027.

Singapore set out its plan to become a gold trading hub in March, following consultations with industry players under a working group.

The group included DBS Bank, ICBC Standard Bank, JPMorgan Chase Bank, UBS, UOB, SGX and the World Gold Council.

It also comprised trading houses StoneX APAC and YLG Bullion Singapore, as well as refinery Metalor Technologies Singapore.

The push positions Singapore alongside other regional gold hubs including Dubai, Shanghai and Hong Kong.