Singapore plays neutrality card to vault central bank gold, elevate bullion hub status

[SINGAPORE] Singapore is leaning on its neutrality to attract central bank gold flows as it pushes to build a regional gold trading hub, but analysts say the real test will lie in whether it can generate enough liquidity to sustain it.

This follows moves by the Monetary Authority of Singapore (MAS) and the Singapore Bullion Market Association on Mar 27 to deepen the Republic’s precious metals infrastructure.

Gold has advanced around 50 per cent from a year ago, fuelled by sustained demand from investors and central banks amid mounting geopolitical uncertainty.

The yellow metal peaked near US$5,500 an ounce in January before retreating as much as 17.5 per cent between Feb 27 and Mar 23 amid the Middle East crisis. It was trading around US$4,589 an ounce at 2 pm on Thursday (Apr 2).

One area in particular that Singapore is focusing on is providing vaulting services for foreign central banks, as well as adopting internationally aligned vaulting standards.

Analysts told The Business Times that this could help differentiate it from other gold hubs such as Hong Kong in an increasingly fragmented geopolitical environment, as it plays to the Republic’s strengths in governance, legal clarity and position as a neutral financial centre.

Robin Tsui, Asia-Pacific gold strategist at State Street Investment Management, noted that while Hong Kong’s proximity to China – the world’s largest consumer of physical gold – gives it a “natural advantage”, Singapore can position itself as a “neutral gold hub serving investors and Asia-Pacific‑wide flows”.

Priyanka Sachdeva, senior market analyst at Phillip Nova, agreed that while Hong Kong retains a “structural advantage” given its established bullion trade links, Singapore is positioning itself as an “internationally aligned bullion centre anchored in transparency, compliance and sovereign-grade vaulting”.

“This differentiation is vital to lure institutions that prioritise regulatory consistency,” she noted. “Singapore is probably trying to evolve its niche as a trusted custody and trading hub for international capital, rather than a gateway tied to a single domestic market.”

Christopher Wong, foreign exchange strategist at OCBC, similarly noted that these key focus areas suggest Singapore is aiming to intermediate regional and global flows.

“For central banks, gold is not just an asset, but also part of reserve management,” he pointed out. “In a more fragmented geopolitical environment, questions around where gold is stored, how easily it can be mobilised, and under which legal frameworks, are becoming more relevant.”

He added that, in this context, Singapore stands out for its “institutional strength, legal clarity and open capital framework”.

“That combination makes it a credible option for diversifying reserve storage, particularly for entities looking to reduce concentration in traditional Western vaulting centres.”

Liquidity is key

For Singapore’s gold trading hub push to take off, industry observers highlighted the importance of attracting sustained cash flows into the precious metals market.

Sachdeva of Phillip Nova said: “Becoming a true Asia-Pacific gold hub requires more than physical vaulting capacity; it depends on liquidity offered by markets, as well as acceptance and participation from global bullion banks and institutional investors.”

Crucial factors to achieve this, she said, include the development of an active spot and derivatives market, strong regulatory clarity, and connectivity to regional trade flows.

“Ultimately, volumes decide winners. If liquidity builds, Singapore succeeds,” she added.

OCBC’s Wong reckoned that building a gold hub “ultimately hinges on liquidity, trust and connectivity”.

“Clearing, vaulting standards and new products are important, but the real test is also whether Singapore can attract consistent two-way flows: from central banks, bullion banks and institutional investors.”

Complementing, not competing

As Singapore seeks to elevate its standing as a regional gold hub, analysts suggest that it should prioritise value-adding to the gold hub ecosystem over competing for trade flows.

Sachdeva noted that despite Singapore’s gold market being geographically viable, it is currently “fractional” compared to more developed markets. This means that the Republic is “unlikely to displace existing hubs”.

State Street’s Tsui said: “Singapore’s role should be complementary rather than competitive, aligning with Asia-Pacific physical flows and time-zone demand while remaining connected to global price‑setting centres.”

OCBC’s Wong noted that, in the grand scheme of things, gold markets are “inherently networked”.

He explained that London remains the leading centre for over-the-counter trading, with daily trading volumes averaging US$30 billion to US$40 billion, while Shanghai reflects domestic Chinese demand.

“Within this ecosystem, Singapore can add value by strengthening Asia time-zone liquidity, and facilitating physical flows into South-east Asia and India-linked corridors,” he said.

Wong added that the push into sovereign vaulting also positions the Republic more as a reserve and storage node, rather than just a trading venue.

Christopher Irwin, head of foreign exchange and precious metals trading Asia at Julius Baer, said: “By strengthening regional connectivity, improving settlement efficiency and providing a stable, neutral location for both trading activity and reserve storage, the country adds meaningful depth to the global precious metals ecosystem.”