Singapore to start gold contract
SINGAPORE will introduce a physical gold contract this year, highlighting how demand has shifted east.
The world's first exchange-traded, wholesale 25 kilobar gold contract, to be listed on the Singapore Exchange, is scheduled to start trading as early as September, Trade and Industry Minister Lim Hng Kiang told the London Bullion Market Association Singapore Market Forum yesterday.
One of the most-traded Asian gold futures contract currently is the one on the Shanghai Futures Exchange, which is a one kilogram contract. But it is closed to foreign investors.
Shanghai will also start international bullion trading, and the Shanghai Gold Exchange plans to start its contract priced and settled in yuan in the third quarter, chairman Xu Luode told the same gathering.
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 World Gold Council.
China became the world's largest user last year, boosting consumption as prices fell.
"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 and New Zealand Banking Group. "It's only going to be positive for Asian gold demand."
The Government is promoting Singapore as a centre for precious metals, having removed 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 last year, compared to 2012.
About 30 per cent to 40 per cent of new bullion demand comes from the so-called kilobar market, Ng Cheng Thye, chairman of the Singapore Bullion Market Association, told the conference.
The Singapore contract, which will have no price limits, will trade from 8.30am to 11.25am, with additional 5-minute, pre-opening and pre-closing sessions.
The Singapore Exchange will act as the central clearing house, Mr Lim said.
"This is a timely development, given the increased requirements for reference prices to be transparent," he told the conference, which was organised by the London Bullion Market Association.
"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," he said.
Metalor Technologies is in the final stage of getting good-delivery certification from the London Bullion Market Association for its new gold refinery in Singapore, chairman Scott Morrison said at the conference.
Singapore was chosen as the site for the plant, which will also produce silver, because of its location between China and India, he said. The countries are the world's largest consumers.