New Vaulting Service Anchors Singapore’s Push
Singapore is broadening its gold-market infrastructure in a bid to attract foreign reserve holdings and more bullion transactions as trading activity increasingly shifts toward Asia. The Monetary Authority of Singapore launched a vaulting service on Tuesday for foreign central banks and sovereign entities, with an initial capacity of 500 metric tons, CNBC reported.
The service forms part of a wider effort to strengthen the city-state’s position in the bullion business. Singapore also plans tax exemptions for selected wholesale gold services, including storage, refining, recasting, testing and broking. A physical gold clearing system announced in June is expected to begin operating in the first quarter of 2027, facilitating settlement of bullion transactions in Singapore.
Together, the measures address custody, service costs and transaction infrastructure. Their ultimate impact, however, will depend on whether Singapore can attract enough gold and trading activity to build a deeper market, rather than simply expand its role as a place to store reserves.
Sovereign Custody Offers a Distinct Proposition
Singapore already has commercial gold storage, including facilities at the high-security freeport near Changi Airport. The new offering differs because it will be operated by the central bank, giving foreign monetary authorities another sovereign institution through which to hold their gold.
Shaokai Fan, global head of central banks at the World Gold Council, told CNBC that such additions to sovereign gold custody are uncommon. He said the launch comes as geopolitical tensions prompt central banks to reconsider the locations of their bullion reserves. A World Gold Council report published in September found that several countries had diversified storage over the preceding 12 months, while many were planning to do so.
Fan identified Singapore’s political stability, legal framework and extensive air connections as potential advantages over traditional storage locations. Those attributes could support demand for custody, although the source provided no commitments or deposit volumes from prospective users of the new service.
Established Hubs Set a High Competitive Bar
Singapore’s initial capacity is modest compared with the scale of established centers. London vaults held approximately 9,850 metric tons of gold at the end of October across commercial and central bank storage. London also remains the leading global over-the-counter gold market, supported by a trading network that goes well beyond vault capacity.
Hong Kong is expanding its own gold storage and clearing infrastructure while benefiting from its proximity to China, the world’s largest gold market. Juerg Kiener, chief investment officer at Swiss Asia Capital, told CNBC that Singapore was entering the physical-hub business late and would need substantial volume to support trade-backed structures.
Kiener argued that Hong Kong’s role as China’s connection to international markets makes it difficult for Singapore to compete in gold-backed trade. He suggested Singapore could instead develop a more specialized position in physical storage for financial institutions, while noting that commercial custody services are already available there.
Liquidity Will Determine the Broader Market Impact
Nikolas Kavalis, managing director at Metals Focus, described sovereign vaulting as a significant addition to Singapore’s existing infrastructure, but said custody alone would not create a complete bullion market. The larger task is generating the liquidity and transaction activity needed to compete with London.
Both Singapore and Hong Kong are still building their local clearing systems, according to Kavalis. Neither yet has the depth of trading infrastructure that supports London’s position. Attracting central bank holdings could help Singapore develop liquidity, particularly if locally stored gold becomes available for transactions rather than remaining solely in custody.
That distinction leaves an important uncertainty around the initiative: attracting reserves and attracting active trading are related but separate goals. Fan highlighted the difficulty of developing both together, since market participants seek liquidity before committing volume, while liquidity itself depends on sufficient participation.
Asian Gold Flows Leave Room for Different Roles
Singapore’s plans coincide with a longer-term change in bullion distribution. Kavalis said gold historically passed through London and Switzerland, where large bars were traded or refined before being sent to Asian buyers. Over the past decade, expanding Asian refinery capacity and rising regional demand have enabled more direct movement between Asian markets, reducing reliance on European centers.
More developed Asian hubs could reinforce that shift, but they need not serve identical customers. Kavalis said Hong Kong may have an advantage among central banks and institutions with close financial ties to China, while Singapore could attract those already engaged in its banking and financial markets.
Fan likewise saw scope for the two centers to complement each other. Singapore Deputy Prime Minister Gan Kim Yong said Tuesday that their development was not necessarily a contest for a fixed pool of business, presenting the new vaulting service as another diversification option for central banks. The planned 2027 clearing-system launch is a further step in Singapore’s expansion, but whether its financial-center reputation translates into substantial bullion flows remains unresolved.
Source: CNBC