Asia as the World’s Precious Metal Hub: Singapore Cuts Taxes on Gold as Hong Kong Adds Storage Facilities

Asia will likely become the world’s gold hub soon. That’s because key Asian countries as Hong Kong and Singapore (as well China) have been taking substantial steps to attract gold and other precious metals trades.

First, Singapore recently cut taxes on precious metals

From Mineweb.com

Singapore has repealed a 7% tax on investment-grade gold and other precious metals to spur the development of gold trading in the country. It is hoped the move will lift demand for gold bars and coins in the fourth quarter and applies to gold of 99.5% purity, silver of 99.9% purity and platinum of 99% purity.

While in the works for several months, the repeal came into effect on October 1.

Singapore is hoping the scrapping of the tax will lure bullion refiners to the country and convince trading houses to open storage facilities, transforming it into a key Asian pricing hub. along the lines of London and Zurich. Currently holding 2% of global gold demand, the Southeast Asian city-state aims to hike that to 10% to 15% over the next five to 10 years.

Currently, Singapore imports gold bars from Australia, Switzerland, Hong Kong and Japan, which are then sold to buyers in Southeast Asia and neighbouring India.

Singapore's investment gold demand nearly tripled to 3.5 tonnes in 2011, according to consultancy firm GFMS. Singapore has already tripled gold imports year over year, ending December.

At least one major refiner has already shown interest in opening a factory in Singapore. More gold traders are expected to set up offices and store more bullion, post the move.

Gold scraps from the across the region are also traded in Singapore, which helps determine the premiums for gold bars against prices in London.  Earlier, refiners were put off by Singapore's taxes, opting instead to mould and sell gold bars in Hong Kong, which does not impose duties on bullion, and Japan, where the consumption tax on gold was very low.

Also, Hong Kong has been adding to gold and precious metal storage facilities. 

From Sovereign Man’s Tim Staermose,

While the current world hubs for gold trading and storage are London, Zurich, and New York, stores of physical metal are also beginning to migrate east. Gold storage facilities are springing up all over Asia like mushrooms after a summer rain.

Back in 2009, the Hong Kong Airport Authority set up the first secure gold storage facility inside the confines of the Hong Kong Airport.

This September, Malca-Amit, the Tel Aviv-based diamonds and precious metals company is opening a second state of the art facility at the airport, which will have capacity for 1,000 metric tons of gold.

That compares to the 4,582 tons that the US government claims is in Fort Knox, and the record 2,414 million tons that the world’s exchange traded gold funds collectively held – mostly in London– as of July 5th.

Malca-Amit also has a facility in Singapore’s Freeport complex, and the company is planning a third Asian precious metals storage facility in Shanghai in the near future.

As the world’s precious metal hub, this means wealth is likely to flow or move from the West to the East.

I believe that these steps could be seen as insurance against the reckless fiscal and monetary policies of mostly developed Western governments. Add Japan to them.

Parallel Universe: Singapore Exports Fall, Stock Market Surges

It’s a bizarre world. We seem to live in a “parallel universe” or a separate reality coexisting with one’s own (Wikipedia.org)

On the one hand, you have soaring financial markets.

On the other hand, signs of a staggering real economy have become more evident.

Singapore’s self-contradicting financial markets and the real economy seem like a good example.

From Bloomberg,

Singapore’s exports fell more than economists estimated in August as shipments of electronics dropped and companies sold fewer goods to Europe.

Non-oil domestic exports slid 10.6 percent from a year earlier, after a revised 5.7 percent increase in July, the trade promotion agency said in a statement today. The decline exceeded all 15 estimates in a Bloomberg News survey, where the median was for a 4 percent drop…

Singapore’s electronics shipments by companies such as Venture Corp. fell 11 percent in August from a year earlier, after climbing 2 percent the previous month.

Non-electronics shipments, which include petrochemicals and pharmaceuticals, decreased 10.4 percent. Petrochemicals exports gained 1.3 percent, while pharmaceutical shipments slid 3.2 percent after rising 1.3 percent in July.

Singapore’s non-oil exports fell a seasonally adjusted 9.1 percent last month from July, when they dropped 3.6 percent, today’s report showed.

Who says economic growth drives stock market prices? Singapore’s STI has been up an amazing 16.02% year-to-date as of Friday’s close, even as annual economic growth rate has been faltering. (chart from tradingeconomics.com)

Central bank policies have nurtured a parallel universe.